straddle

ZNGA lives!

Submitted by atg on Wed, 05/15/2013 - 4:45pm

I want to characterize today with movement. AAPL trades from 441 to 422, GOOG trades from 894 to 916 and PCLN from 789 to 808. Stocks are moving again and I alluded to that yesterday that the realized volatility for names is starting to pick up. VIX managed up .04 but really the story is that stocks are moving and the reason is money is coming back into the market. I think this means that things that really were not possible with positions most of last year are possible now. You can buy some options and have a shot at making money. Let’s look at a stock in the basement, ZNGA.

Blog Image:

BAC IV Probably Too Cheap

Submitted by msebastian on Thu, 04/25/2013 - 4:41pm

IN the last few days, since Bank of America took a dive on its earnings, the stock has found some real strength. BAC is now just a few cents from its 52 week high and threatening a 2 year high. The move has not been a slow grinding move like we see sometimes out of banks. It’s been a nice quick move.

This is why I am so confused by where BAC IV is trading. Take a look at this stock chart, IV graph (the red line) and 20 day HV chart (the blue line).

LivevolX (R) www.livevol.com

The Sissification of Risk

Submitted by atg on Wed, 03/27/2013 - 4:47pm

Yes I made that word up. I make them up all the time during the Pit Report. I was looking for a phrase to describe the activity, and it was hard to put things into words. Essentially market participants want return without taking risk, and then complain when they lose. The market for risk has become "sissified." The trend was started with the bailout of Mexico in the early 1990s and went to Asia, sort of hit the USA with LTCM and is now stuck in Europe where it will remain for some time. I think Europe had their Lehman moment and things got a little ugly after that. You might say TARP, but that was loan guarantees against bank assets.

AMZN Earning's Analysis as Seen on Bloomberg TV

Submitted by msebastian on Tue, 01/29/2013 - 4:09pm

Today, our COO Mark Sebastian was on Bloomberg TV today talking about AMZN earnings. You can watch the Video here:

Mark made several points. The first point was the direction of the paper, which, for the most part, has been bullish volatility all day. You can see a sample of trades over 151 contracts here:

Kersplat goes the implied volatility in FB now what to do?

Submitted by atg on Tue, 01/15/2013 - 6:35pm

We have spent a lot of time in this blog chronicling the movement in Facebook. I think the stock has been a really good trader except of course for the $38 buyers on the IPO. It feels like nobody wanted the stock at $19 either because all the initial investors were getting out. Some did for sure as was reported today but by and large there is a big group of holders not quite ready to hit the bricks yet. The lockup expiration dates have been the great buying opportunities of the year for this name. I guess the point is that when things are telegraphed this well in advance they are generally not what they seem?

AAPL Earnings Straddle is Really Juicy

Submitted by msebastian on Mon, 01/14/2013 - 4:58pm

We all know that AAPL has had a rough couple of months. The stock has moved up and down 200.00 in the last 6 months. The company has earnings next week and I wanted to put into perspective how much the fear is priced into options right now. Take a look at this chart of AAPL stock and IV.

Livevol (r) www.livevol.com

The Vol is a lot higher than it was last earnings, despite the fact that AAPL had taken a dive from over 700 to near 600. If we compare straddle prices with about the same time to expiration I think it becomes even more clear.

This is a straddle from October 18 2012.

Understand Fiscal Cliff Straddle Risk in SPX

Submitted by msebastian on Fri, 12/28/2012 - 4:30pm

It's been interesting to watch this fiscal cliff debacle develop. A week ago, I had the market pricing in a 92% chance of a deal getting done. Yesterday morning, the market was pricing at about an 80% chance of a deal getting done. Today, that number remains close to 80, although slightly below that now, near 75%. In fact, we can clearly see in this list of SPX weekly option vols what is driving up the VIX:

Livevol (r) www.livevol.com

Facebook Volatility is Still Cheap

Submitted by atg on Mon, 11/26/2012 - 5:25pm

I had to blink recently, because I thought FB was just a $20 stock. Nothing makes momentum traders happier than an upgrade of a whole bunch of technology stocks at once. FB, AAPL and YHOO all got the nod today from influential analysts and banks. We have had a small short put spread position in YHOO in our Strategy Letter for a while now, so I agree with the bullishness. One thing about the rally in FB is that it was accompanied by a rise in volatility. That I think is interesting.

WishNeedWantHope

Submitted by atg on Wed, 11/21/2012 - 4:37pm

Sometimes the holiday period brings a surprise of action. Last year with iteration 5 or 6 of the Euro Crisis ending we caught a huge rally and volatility compression right through Thanksgiving. It feels like we got that early, on Monday really, this year. That leaves us with the gap between the holidays and the news about Congress and the White House hunkering down to earn their pay checks and perks. I am hopeful but students at Option Pit know that hope for a trader is a 4 letter word. It goes on the list with need, wish and want. If you find yourself in a trade and the only thing going through your mind is one of those 4 letter words, you should probably look for the exit or adjust. A lot of risk management is like that.

The banks are toast for now

Submitted by atg on Wed, 11/14/2012 - 6:55pm

There is a pattern beginning to shape since the election and for the most part it is not good for equities. The day before the election was a near time high for stocks and the market has not sniffed that again. The European situation is mostly the same so I don’t think it is there. The problem is here and what all market participants fear which is the total inaction of the government to get its house in order. Mind you I don’t think it is a 1250 SPX type problem but more of a slow melt until a resolution and most likely a rally. The morning economic news is a little brighter each day followed by a steady selloff after any politician opens their mouth.