Options Education

Playing Dell Options for a Dividend

Submitted by atg on Mon, 12/10/2012 - 4:55pm

One of the interestings stories coming out of the Fiscal Cliff is the juggling of cash positions that is occuring amoung many of the high market cap companies that produce a lot of cash. We have seen ORCL accelorate their dividend, and we have seen nearly 100 other companies on the S&P 500 adjust their dividend schedule, announce a special dividened, or speed up dividend payments ahead of the cliff. Today, our COO Mark was asked about another major name, DELL, and how one might play Dell options. You can watch the video here:

Demand for Gamma and Vega is Light

Submitted by msebastian on Fri, 12/07/2012 - 5:09pm

As we discussed on Tuesday, VIX was not just pricing in the cliff, it was pricing in the non-farms that came out today. While the December contract really hasn't moved since then, the Cash Index has come in considerably. The curve closed the day basically back to normal contango, albeit a relatively flat contango.

www.vixcentral.com

Playing VIX Term Structure

Submitted by msebastian on Tue, 12/04/2012 - 5:11pm

Over the years, I have made the argument repeatedly that I think SPX puts do a better job of hedging than VIX calls, especially in low VIX environments. However, like all trades and hedges, that is not a rule but a generality. There is something strange going on in VIX that is making going long call spreads in VIX very favorable. Take a look at VIX term structure:

www.vixcentral.com

Will AAPL Be the Next to Declare a Div?

Submitted by msebastian on Mon, 12/03/2012 - 5:52pm

Today, for The Street, I wrote an article pointing out the list of companies I think could be next in line for a special dividend. On that list was ORCL, who just announced after the bell that theirs could be a special dividend. The companies I looked for were super stable, high market cap, low PE, and loaded with cash. Naturally, at the top of my list: AAPL

Take a look at how much cash per share the company is currently holding. It is an incredible amount of money that the company has on hand, and it represents a big portion of the stock's value. I think, as a company that is printing money right now, it is borderline irresponsible for the firm not to have some sort of special dividend.

Not Buying the SPX, Look at a Calendar

Submitted by msebastian on Tue, 11/27/2012 - 4:37pm

At Option Pit, our goal is to teach our option mentoring students not just the strategy, but the theory behind why one would execute a strategy. We want our option traders to learn how to construct their own trades, not just regurgitate others' trades. Learn more about how we teach here. Here is an example:

GVZ All Time Low Again, GLD Trade Developing

Submitted by msebastian on Mon, 11/19/2012 - 4:46pm

Our COO was on Bloomberg TV today talking about the Gold and the low GVZ in the gold options. If you missed it you can catch it here.

Gold has spent the last few weeks bouncing between its 200 and 50 day moving averages (not something I watch, but traders who trade gold do).

Livevol (r) www.livevol.com

A Fool Proof Election Trade?

Submitted by msebastian on Tue, 11/06/2012 - 5:51pm

Tonight as I write this Intrade is predicting an Obama victory to the tune of about 70% or so. This will be bullish some assets and bearish others. The assets I would be bullish are:

Gold
Oil
Treasuries
Non-Dividend yielding stocks
Any currency relative to the dollar

I would be bearish

VIX
The Dollar
Dividend Yielding Stocks

If Mitt Romney does eke out a win I would be bullish:

The SPX
The Dollar
Coal

I would be bearish

A Price and Vol Bottom in GLD

Submitted by msebastian on Fri, 10/26/2012 - 3:33pm

Many of you saw the GVZ write up I did for Mad Money on Tuesday's Off the Charts (if you didn’t it’s the 1st video on the bottom of our homepage). In the piece I point out that I think GLD might be ready for a push higher because GVZ is so low. Recall that last week the index hit an all-time low in the mid 14's. While today the index is still lingering near the 15% mark. I think it could be bottoming, as could the stock.

Gold moved so now what do we do…

Submitted by atg on Fri, 10/19/2012 - 4:53pm

The market finally got the selloff it wanted. We had steeper put skews and relatively elevated volatility, so the volatility markets were right. This was one of the first weeks Option Pit did not have a short VIX/VXX play in our Strategy Letter (that might change Monday) over the last 2 months. But if I asked you right now if the SPX was up on the week, what would you say? The SPX is up about 5 handles from last Friday, and the VIX is up near a full point. The market was up and volatility was up for the week, so let’s see how long that will last. One place the volatility was up was Gold.

GVZ At Lowest Level Since Listing of GLD Options

Submitted by msebastian on Thu, 10/18/2012 - 4:40pm

One of the things we constantly talk about with our option mentoring students is option volatility and IV indexes. In all the talk of the 'low' VIX, traders may be missing a real opportunity: GVZ, the Gold VIX. Take a look at a chart of GVZ since GLD options were listed on the CBOE:

Thinkorswim