Something Jiggy This Way Comes
Something Jiggy This Way Comes
Two days in a row and we have seen some pretty nutty market movement. You would not know it though by the close to close numbers. The best thing that can be said about the new Euro troubles is that US Equities donít like the news and then change their minds in a quick fashion. For those of you new to the Option Pit blog that little market turnaround is know as realized volatility intraday. There are lots of ways to measure realized volatility but the gist is that the underlying security is moving a whole bunch or not very much. One of my favorites to trade recently is UNG. This is a security that went from sleepy time to quick time in a hurry. Take a look at the intraday chart below.
The intraday movement was about $1.30 in the average true range kind of way measuring the high and low of the day intraday. That works out to a little less than 8% for the daily range. This is a pretty big move for UNG and the something is cooking up in this Nat Gas ETF. See the 10 day HV below:
Livevol (R) www.livevol.com
There is an adage trading options that traders want to buy cheap volatility and sell expensive volatility. That really pertains to Vega risk. Gamma risk is a different animal because the movement can savage a short option position. When a sleepy ETF like UNG gets hot, watch out because the pan is on the fire. By keeping the duration of the position short, a quick exit is possible and traders can squeeze a few bucks out of the movement without the theta becoming an issue.
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Mark Sebastian is the Director of Eduction for Option Pit, and a former market maker on both the Chicago Board Options Exchange and the American Stock Exchange. He is co-host of "Option Block," the wildly popular show on The Options Insider Radio Network.
He has been published in nationally on Yahoo Finance, quoted in the Wall Street Journal is a featured contributor for TheStreet.com. He also writes regularly for SFO, and OptionsZone, and is the managing editor for Expiring Monthly: The Option Traders Journal.
To learn more about Option Pit and its mentoring services, please visit OptionPit.com
Mark Sebastian is the Director of Eduction for Option Pit, and a former market maker on both the Chicago Board Options Exchange and the American Stock Exchange. He is co-host of "Option Block," the wildly popular show on The Options Insider Radio Network.
He has been published in nationally on Yahoo Finance, quoted in the Wall Street Journal is a featured contributor for TheStreet.com. He also writes regularly for SFO, and OptionsZone, and is the managing editor for Expiring Monthly: The Option Traders Journal.
To learn more about Option Pit and its mentoring services, please visit OptionPit.com
About Mark Sebastian
Mark Sebastian is a former market maker on both the Chicago Board Options Exchange and the American Stock Exchange. Along with his role directing the path of education for Option Pit, Mark is currently the director of risk for a private hedge fund. He writes a daily blog, the Option Pit blog, formerly Option911. Sebastian has been published nationally on Yahoo Finance, Google finance, Financial Times Alphaville and is a featured contributor for TheStreet.com. He is also published regularly at SFO, the Options Insider, and is one of the Co-Hosts of The Option Block Podcast, a featured Podcast from Options Insider Radio. Mark is the managing editor for Expiring Monthly: The Option Traders Journal. Sebastian has a Bachelor's in Science from Villanova University.
To learn more about Option Pit and their mentoring services, please visit: http://www.optionpit.com
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