August 20, 2017

Volatility is Back…So Are We…

We're back. Or better said, it's back. That's right...our old friend Mr. Volatility has once again made an appearance. Just look at the chart below.   For those of you who have no idea what I'm talking about the VIX, or implied volatility is back above historic lows. After much research, we know when the VIX reaches 13 or below selling options in the major indices is typically a bad idea. Basically, the VIX below 13 is an options sellers kryptonite...that is if you are selling options on SPY, SPX and a few other highly-liquid underlyings. But the VIX is once again back above a tradeable level so let the selling begin. Over the course of the next week I plan on selling options on SPY and SPX using credit spreads and … [Read more...]

It’s All About the VIX…

We experienced what is known as volatility crush today. The investors fear gauge, otherwise known as the VIX lost close to 16%. As an options seller who takes advantage of heightened levels of volatility, today was great...but more importantly, I expect more opportunities ahead. Why? Simply stated, uncertainty. The government shutdown, debt ceiling woes, etc. have finally pushed implied volatility off of historic lows. My hope is that the volatility index can stay above 13, preferably 15. Because we know that a push below 13 makes it very difficult to sell meaningful premium while simultaneously creating a decent margin for error. The higher the VIX, the more premium we can bring in on each and every trade, plus we have the … [Read more...]

Is this the Beginning?

Today began like most others during this five year bull phenomenon...bad news equals gap lower open only to be immediately pushed higher by the bulls. But the ending this time was far different than most of the other trading days we've been privy to recently. We saw a nasty sell-off into the close. Yes, the bears reign supreme for at least a few blips on the screen. And strangely enough things feel different this time around. The market feels top heavy and so it should...just look at the performance of the S&P 500 (SPY) market over the past five years. Will the bears continue the charge lower? I'm inclined to say, YES! But, I think we've all been inclined to say yes on numerous occasions only to be fooled by the fed-fueled rally … [Read more...]

The Right (and Wrong) Way to Approach Options Trading

I just want to start off with a few random thoughts. Enjoy the post and as always, please do not hesitate to email me with any questions or comments.  September expiration has finally passed us by. It was a rather smooth month until Helicopter Ben stepped in this past Wednesday. Of course, the bulls were certainly more than ecstatic about the results. But, the move was short-lived and as we enter post triple witching we should expect to see further declines. On second thought, Ben's message might have been one of the best things to happen to the bears in quite some time. Couple the aforementioned with the fact that we are witnessing record inflows into funds and you start to get the sense that the bears might have a turn … [Read more...]

Triple Witching – Potential Credit Spread Tomorrow

Market Mumbo Jumbo It has been an interesting options expiration week. The S&P 500 (NYSE: SPY) has lost a total of $0.30 since the close last week - a paltry decline.  However, this did not stop Mr. Volatility from finally making an appearance. Options traders, particularly those of us who sell options premium, can finally rejoice. Options premium has finally moved back into this market. Now if the VIX could just hold 20 and move as high as 35 I would be one happy option trader. With that being said, I look to place a position at some point tomorrow in the my new credit spread strategy. Stay tuned! Options Indicator – Overbought – Oversold Every ETF that I follow basically stay within a short-term neutral state today so I … [Read more...]

Options Indicator in a Neutral State – Remember, Patience is the Key to Any Successful Options Strategy.

No trade today - the risk/reward is just too high at the moment. I would rather sit patiently on the sidelines for a better set-up to come my way. This is how to successfully play the options market or any market for that matter. Any trader with staying power will quickly tell you that patience is imperative when trading, particularly when trading options. My true focus and the focus of my options strategy is to find extremes in the market. Lately the major benchmarks and the sectors I follow just want to sit in a neutral state. That is fine, extremes will hit the market as they always do and I will be waiting patiently to jump on those opportunities when the arise. Remember, patience is the key for long-term success in options … [Read more...]

Short-Term High Probability, Mean-Reversion Indicator – South Korea (EWY) Overbought – VIX Hits Historical Extreme

The trading day began with a small bounce higher which lasted through most of the day. During the final hour sellers finally stepped in and pushed the market lower. Could we see lower prices ahead? I stated the following this weekend: There are lots of bearish signs moving into the market. Over the past week, the VIX has gone from more than 30% above its average to more than 15% below. In the past this type of volatility in volatility has been overwhelmingly bearish. If you just look at 15% both ways there are eight instances when this type of movement has occurred and only once was it bullish for the market one month later. Furthermore, the major market indices are overbought on a short-term basis and nearing overbought on an … [Read more...]