Last week, I noted the very wide spread between short-term realized and implied volatilities. Although the selloff on Friday alleviated conditions slightly, [5] the spread is still large enough that traders inclined to be net sellers of options need not fear occasional daily increases in realized volatility.
Sure, the World Series and Super Bowl Sunday are much-anticipated. But personally, I can't wait for the excitement of earnings season, because I get to watch my favorite sport four times a year! Every publicly held company has to report not only their performance during the past quarter, but they also typically provide outlooks for the following quarter and possibly the full year as well. No other market event offers more opportunities for traders to earn big bucks not only on companies' fiscal hits and misses during the past three months, but also for the effect on shares from all of that "other" data that means so much to Wall Street.
An engaging roundtable webcast during which a global panel of financial sector experts discuss whether it's possible to manage a high-performance financial network environment without pillaging the CIO's piggybank…
Often in my option classes I ask the students a question that only on the surface appears to be tricky: "What comes first, the price action on the chart or the print?" Most of the time, the students give me that puzzled look which tells me that most likely they are somewhat confused, yet as the discussion commences, the perplexity becomes more noticeable.
Basically, in this article I will share with the readers an option/choice that a trader could have selected instead of going along with his broker's advice of selling a naked straddle.
The Powershares Nasdaq 100 Trust (QQQQ) is a highly liquid, very popular ETF with actively traded options. But for traders who want to implement an options strategy on the Nasdaq 100 with any precision, QQQQ may not be the optimal product…
A Q&A regarding the upcoming Options Symbology Initiative and its impact on trading firms.
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This is the first of a couple of articles on the topic of how any painful trade can hold a valuable lesson…
My sense of the markets at this juncture is that elevated implied correlations are truthful, even oracular, with too-high index implied volatility representing not so much the jump risk with which the VIX is usually associated as the unwelcome prospect of individual equities tracking each other too closely.
The jump in volatility indexes noted in our previous report was met with a similar decline last week. The VIX could easily make a new 52-week low before 2009 is through. Gold implied volatility advanced sharply on Friday's price decline, with GVZ closing just shy of my 30% short-term target. The shift in the volatility skew in gold deserves attention: if traders continue to pay higher premiums for downside protection this week, that should be confirmation that the parabolic run in gold is over for the moment.
When equity index options consistently price in moves of more than 1.5% on two-thirds of trading days, Friday's trading range should not be a surprise, even if you believe equity volatility is significantly and consistently overpriced. We wouldn't expect longer-dated volatility futures contracts to move noticeably on last week's news, but even the December VIX contract only lifted slightly.