Tag Archive | "oil"

Gold Meets The Fonz

Saturday, November 13, 2010

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Yesterday's “5 Dumbest Things on Wall Street” column on TheStreet.com supports my prior comments about a likely bubble in gold. The version picked up on Yahoo Finance introduces Number 3 with the subhead “Gold Jumps the Shark”: Intercontinental Exchange (ICE) is accepting gold bullion as collateral for positions in energy (yes, this is actually true): “This week, London-based Intercontinental Exchange (ICE) announced that it would begin accepting gold bullion as collateral for energy and credit trades. Take a step back and think about that for a minute: traders will use a highly volatile commodity to back trades—or increase margin—on other highly volatile commodities and derivatives....”

A Collar on Crude (Bonus Trade)

Wednesday, November 10, 2010

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What to do with Oil Volatility

Tuesday, May 25, 2010

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Crude has been hammered pretty hard in recent weeks. My instincts tend, like yours probably do, toward being a net seller of options when implied volatility has become historically expensive. But it’s also a good idea to respect the current trend, as I mention here: While capturing historically high implied volatility is often a profitable approach, a price trend this strong should be respected, so any short volatility trade should either be long some gamma or should have…

Volatility Tracker: Fear Returns

Monday, January 25, 2010

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Volatility Tracker for the week of January 25, 2010 Implied volatility exploded in equities last week as markets were ravaged to the tune of…four per cent? [2] The term structure of implied volatility and the ratio of implied to realized volatility all moved back towards even, indicating how accustomed we had become to substantially overpriced options and contangoed VIX futures. [6,7,8] Implied volatility is now unsustainably high -unsustainable, that is, unless you expect two-thirds of trading days to begin…

Volatility Tracker: Why Index Volatility Is Holding Steady

Monday, December 14, 2009

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Volatility Tracker for the week of December 14, 2009 My sense of the markets at this juncture is that elevated implied correlations are truthful, even oracular, [10] 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 most urgent scenario is of a strengthening dollar and unwinding “risk trade” in which good and bad companies are punished alike,…

Volatility Tracker: Stock-Picking Might Matter

Monday, November 16, 2009

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Volatility Tracker for the week of November 16, 2009 Equity index options are about as evenly priced as they’ve been in some time [5,6], but another continuation of the intermediate-term rally would mean more disappointment for option buyers, especially those who entered new positions in early November. The ratio of short-and long-term (Jan 2010 vs. Jan 2011) implied correlation is getting noisier, but is also challenging its lows for the year. At the Volatility Trading Summit earlier this month, several…

Volatility Tracker: Implied Correlation as a Reflation Proxy

Monday, August 31, 2009

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Volatility Tracker for the week of August 31, 2009 The CBOE Implied Correlation Index spiked to its highest level last week since the beginning of the rally that began this spring. [10] In a healthy, normally functioning market, companies that succeed will see their stock prices rise, while the stocks of failing companies will fall. In a healthy, normally functioning market, the stocks of winners and losers alike won’t rise or fall together in lock step; but the increase in…

Volatility Tracker: Shorting the Conventional Wisdom

Sunday, August 16, 2009

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Volatility Tracker for the week of August 17, 2009 Conventionally, equity prices and implied volatility are inversely correlated, meaning that traders who expect a price decline should be net buyers of options. But as long as the ratio of lagged implied and realized volatility remains this high, [5,6] it makes sense to be a net seller of equity index options, even alongside the expectation of a modest price decline. Regarding index prices, I would only mention that an “overbought” condition…

Volatility Tracker for the Week of July 13, 2009

Monday, July 13, 2009

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Volatility Tracker for July 13, 2009 On the equity front, I continue to expect flat-to-downward price momentum for the summer. Volatility futures have been pricing in a higher level of implied volatility for the late summer for quite some time – a fact to which “green shoots” proponents would do well to attend. [7] I want to call your attention this week to the situation in gold and oil.  Crude oil futures fell from a recent high of $72.92 on…

August Monthly Review

Sunday, August 17, 2008

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Last weekend, we noted that the next phase of this bear market will likely be driven not by U.S. financial companies or by energy prices per se, but rather by the effects of the American slowdown being felt by the rest of the world.  A front page story in the WSJ on Friday noted the falling Eurozone GDP as additional evidence of a global slowdown. Looking forward, we expect continued bullishness in equities next week as the lack…

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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More

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