April 24, 2017

Volatility Looks Interesting…Again

Volatility looks interesting...again. Selling a few bull put spreads in UVXY and VXX looks enticing, but I would like to see the VIX line up with the other two before making a move. The longer-term picture for higher options premium looks bright. According to a recent article in Barron's, followed up with a nice chart b the talented Jason Goepfert, volatility hasn't been this cheap in over 8 years. In fact, implied volatility on the one-month at-the-money VIX options is the lowest in history....this just means options are cheap. According to Mr. Goepfert, " Of the 45 days that the figure had dropped below 45%,  three months later the VIX was higher 42 times (93% of the time) with an average change of +21%. The three days that … [Read more...]

Entering a New Options Expiration

The June options expiration cycle is upon us. But, before we get to June, I want to congratulate all of you who had May bear call spreads on. Keep up the good work! It's been an amazing run. Just remember to stay diligent with your position-sizing and resist the temptation from taking on significantly bigger size. We've had a solid year of gains and we want to keep our profits. Proper risk-management is the key to successful long-term options trading. Without it, you are inevitably doomed to fail. So with that being said, we are on to June. Currently, as most of you know (subscribers) we already have two positions on and will be adding a few more in the coming week. I'm still under the assumption that the next six months (sell in May) … [Read more...]

Decline Leads to Neutrality

Keeping it short tonight. Options expiration tomorrow. Another good expiration...and it looks like June is going to be even better. Also, due to the enormous amount of requests over the past week I have decided to keep my annual deal available for several more days. Thanks again for all of the support. If you are a believer in a statistical approach towards investing please do not hesitate to try my options strategies. I use simple mean-reversion coupled with probabilities for each and every trade. Give it a try, it’s free for 30 days. If you haven’t had a chance,  please join my Free Weekly Newsletter, Twitter feed and/or Facebook page. … [Read more...]

Three Credit Spreads…One to Expire

We currently have three credit spreads on in our portfolio and there is a very good chance that I will be adding another for the June cycle by the end of the week. There are roughly 35 days left until June expiration so we still have some time to collect decent premium. I'm also looking at a few candidates to sell puts on, but I want to see further declines in several of the underlyings I'm following. Anyway, I'm keeping it short tonight....busy few days ahead. Subscribers stay tuned over the next few days. Also, due to the enormous amount of requests over the past week I have decided to keep my annual deal available for several more days. Thanks again for all of the support.   If you are a believer in a statistical … [Read more...]

Emerging Markets (EEM)…Potential Bear Call Spread?

The market continues to teeter at the top. Approximately 58.5% of the ETFs we follow in the daily options blog are in a short-term extreme state at the moment. Typically when we see levels this high a short-term reprieve follows. One of the reasons the ratio is above 58% is the international ETFs. All of the highly-liquid international ETFs we follow are in a short-term extreme. India (EPI) is by far the most overbought at the moment, but it's actually the emerging markets ETF (EEM) that has drawn my attention. With EEM trading at roughly $42.50 we can take advantage of the current short-term overbought extreme by selling a vertical call, or bear call spread. The implied volatility for EEM for the June monthly options (38 days left … [Read more...]

The Perfect Spot for a Credit Spread or Two?

Volatility continues to drop....but for how long? All of the volatility indicators we follow are in a deep oversold state. It shouldn't be a surprise given the recent push to new highs in the S&P. However, now we are witnessing an oversold state on almost every time frame...a reading we rarely encounter. Even our longest-term time frame is in an oversold state. Couple the aforementioned with seasonal weakness and a gap higher today and we can begin to see signs that a reprieve is right around the corner. When I say reprieve I'm not making a definitive forecast that the market is going to push significantly lower, I am just pointing out that the market is going to have a very difficult time rallying further at this juncture so a … [Read more...]

Just the Indicator Tonight

Going to keep it short tonight. Subscribers expect to see a trade or two tomorrow.   If you are a believer in a statistical approach towards investing please do not hesitate to try my options strategies. I use simple mean-reversion coupled with probabilities for each and every trade. Give it a try, it’s free for 30 days. If you haven’t had a chance,  please join my Free Weekly Newsletter, Twitter feed and/or Facebook page. … [Read more...]

Selling Puts on Twitter and a Few Credit Spreads

In yesterday's post  I mentioned a bull put spread in UVXY. well, if I liked it then, I love it now. I mentioned the June 42/41 bull put spread going for $0.30. The spread is now selling for approximately $0.38. But, that was yesterday and UVXY decided to push 3.8% lower today. But it doesn't hide the fact that the spread still has a 78.56%, down from 80.23% yesterday. Moreover, the delta of the 42 strike sits at 0.16, so we are still safely below an adjustment of any kind (typically occurs when the the delta hits 30-35). Another underlying that looks interesting for a credit spread trade, more specifically, a bear call spread, is in the XLE. XLE has pushed into a short-term overbought and the June 99/101 spread is trading for … [Read more...]

Potential Bull Put Spread in UVXY

Yesterday I received an email from one of our loyal readers asking to add Ultra VIX (UVXY) to our mix of highly-liquid underlyings we follow. UVXY, like VXX suffers from contango, so there is a natural bias towards the downside. However, the implied volatility is almost twice that of VXX which is appealing as a seller of options. Of course, that is to be expected since it is the "ultra" VIX, but the UVXY is liquid enough to put on some decent spreads and I'm still comfortable selling options with volatility levels that high. Just remember, as always, keep your position-sizing in check. Anyway, if you take a look at the chart below you will quickly notice that UVXY is in a short-term oversold state. The pop higher occurred today … [Read more...]

How I Define a High Probability of Success Trade

Volatility as seen through the Ipath S&P 500 Vix Short-term Futures (VIX) hit a new low today. Inherently VXX is biased towards the downside due to contango, but just looking at the three month chart you can see the push lower has been swift enough to push the RSI (5) into a "very oversold" state. The market itself has been teetering at all-time highs and the timing couldn't be better for the "sell in May" believers. The "worst six months" as named by The Stock Trader's Almanac officially began today. When coupled with an area of strong overhead resistance the odds favor the bears...and I plan on playing it that way. Of course, as always, I'm going to use a high-probability trade so that even if I'm wrong about my directional … [Read more...]