option trading

Time for Iron Condors

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As we wind into Thanksgiving the liquidity providers have done a good job of squeezing out the holiday premium.  Nov 27 volatility in the SPY, from LiveVol Sigma, is a round 9.43 and will be lucky to hold the 9 handle as Thursday approaches.  Why?  Well the only easy to get the time premium out of the options is roll the days forward.  That will read as lower IV today.

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Energy Stocks buck the trend

Kind of an ugly day in the market or make that an ugly week for the longs.  For the first time in a while I am seeing the move up in VIX outpace the drop in stocks.  Yeah we had a 1% move but 20 VIX seems like there is something to worry about.  The two biggies are rates and oil.  Let’s talk the oil producers.

XOP is up on the day on a down day for oil and stocks in general.  Granted the ETF has been hit with the ugly stick but even AMZN is down today.  The craptastic names should be doing worse.  Lo and behold take a look at the volume in COG.

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Oct VIX asks if China will open already and .....

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I seem to remember this time last Wednesday when the SPX was trading just below 1900.  Chinese markets were closed for a holiday week and the weak jobs number on Friday created the whipsaw we had for the last week and a 100 point rally in the SPX.  Like we saw twice already since the late August debacle, the rallies were as vicious as the selloffs. 

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Market still cares about Greece, sort of.

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The morning looked solid today as stock ran on GOOG, FB and AAPL rallies.  Financials look good as BAC is finally getting out from the constant deluge of fines from the financial crisis.  All was going just fine until reports of unrest in Greece started rumbling through the markets.  Treasuries spiked even into Yellen's hawkish rate tones.  Something happened and it had nothing to do with the USA.

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FB makes all-time highs

Stocks had a hard time today jumping up to all-time highs.  The SPX started the day down and never looked back as the better than expected GDP revisions caused some rate concern.  Greece’s PM also started back on the crazy train so that unsettled European markets after they were anxious to get to higher levels.  FB is not feeling that right now.

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Fed leaves things alone

Yet we have another FOMC announcement with the Fed choosing to do nothing.  I don’t know how far the economy has to grow before rates start to normalize but we have to be getting close now.  We had the 90’s and a government surplus and higher rates and no one was complaining.  Once again post-meeting the VIX dropped even with near sure 25 basis point rises in 2015 mapped out.

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The market starts to worry

The euphoria of Thursday is now over.  The rally we had on concessions from Greece now give way to the fact that the Syriza party is running for its next election realizing it cannot deliver on any promises besides sending Greece into the economic stone age.  Volatility traders love this because it is, well, some volatility to trade.  Volatility wants to move, but only at the pace of a 3 legged race.  The will to move out is not there yet.

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Do we get to the 9 handle?

I toss that out there of course and I don’t mean VIX.  What I do mean is the ATM volatility for the SPX.  With the Greece deal on and off again the one thing that has been consistent over the last two days is the total immolation in implied volatility.  The 9 handle for SPX ATM IV is a tough barrier to break because it means traders are actively hitting option bids on the downside to drive the ATM lower.  We are almost there.

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Are Utilities signaling higher rates?

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We have another lackluster session today with  no good news coming out of the EU on the Greece subject.  For now that is the millstone around the market’s neck with things just dragging.  Besides NFLX up, stocks cannot put in any kind of sustained rally.  Bonds are getting trashed too in the face of QE out of the European Central Bank. 


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