YUM! Brands has been regarded for some time as a play on discretionary spending in China – as part of the shift from exports to domestic consumption. Given that framing, YUM investors are pretty sensitive to changes in data coming out of China. After the market close on Thursday, YUM guided lower on Q4 sales in China. Half of the operating profit in the third quarter came from China, so a forecast for a 4% drop in same-restaurant sales…
Monday, August 13, 2012
Financial markets change along with the real economies on which they depend. This maxim applies to investing strategies and options markets, too. For example, the “fire and forget” approach to option selling that some traders favored in the pre-crisis world is no longer tenable (if it ever was). Risk appetites have shifted, order flow is moving into different products, and the cast of influential market agents is composed of different actors. As detailed in the attached video, here are some…
Friday, April 13, 2012
I gave an online seminar on Wednesday, April 11th on implied volatility skew in partnership with TheStreet’s Options Profits service, where I am also a contributor. It was a lot of fun, and we got some great questions from participants. If you missed the event, the link below will allow you to play back or download the full webinar. https://thestreetevents.webex.com/thestreetevents/lsr.php?AT=pb&SP=EC&rID=5088857&rKey=52967bc2198a8c00 Volatility Skew and its Impact to Options Trading-20120411 2101-1 April 11, 2012, 5:01 pm New York…
Monday, April 9, 2012
I’m giving a free webinar in partnership with TheStreet’s Options Profits service on Wednesday on option implied volatility skew. I’m going to review, quickly, what IV skew is, present the results of our recent study for Expiring Monthly, and work through some examples of how to use skew information in timing and structuring positions. When: Wednesday, April 11 Time: 5pm ET CLICK HERE to register for the webinar You will be able to pre-register but the presentation will not be live until…
Thursday, March 15, 2012
Implied volatility (IV) skew is one of the most important and interesting aspects of listed options. IV skew typically refers to the differences in the implied volatilities of options in the same expiration cycle with different strike prices. There have been many attempts in the academic literature to model the behavior of changes in skew, but the interpretation of skew information by traders is still done largely on a qualitative and ad hoc basis. In “Quantifiable Implied Volatility Skew,”…
Friday, February 24, 2012
The jargon of options trading sometimes turns people off, and maybe “volatility skew” is one of the biggest hurdles. So I’m going to explain the concept in a straightforward way, and then explain why volatility skew is something you should care very much about. Volatility skew usually refers to the difference between the implied volatilities of options at different strike prices in the same expiration cycle. For the majority of stocks and indexes, options with high strike prices have low…
Monday, January 23, 2012
Last week SPY-options implied volatility dropped by almost 15%, which, along with the share price climbing above the center of our risk curve, was a drain on both unrealized return and projected profit at expiration. However, following the strategy rules for managing volatility risk with our entry trades is paying off: at Friday’s close, the unrealized return on our February trades was up from the week before. In post-session options-trading, we were showing about a 3.8% unrealized return on total…
Friday, January 6, 2012
With the January put vertical spread closed, we have enough margin available to open the following position for February expiration: Day limit order Buy to open 2 SPY Mar 131 calls Sell to open 2 SPY Feb 131 calls Buy to open 2 SPY Mar 125 puts ell to open 2 SPY Feb 125 puts for a net debit of $2.40 or better. Note that 2 contracts is our base position for double-calendars. Trading whole-number…
Wednesday, December 14, 2011
We’re reducing our risk this afternoon by closing the call side of our December/January double-calendar, as follows : Day limit order Buy to close 2 SPY Dec 131 call Sell to close 2 SPY Jan 131 call for a net credit of $0.36 or better. Note that the 2 contracts specified above represent all of our current position in the Dec/Jan 131 call calendar portion of the 123/131 double-calendar. Analysis: I’m going to start off the analysis…
Thursday, December 1, 2011
In the embedded video, I look at some interesting volatility phenomena in USO options, SPY volatility skew, and VIX and VSTOXX futures. Here are the trade ideas mentioned: Short USO implied volatility / long USO realized vol: on the view that USO options are richly priced relative to likely future USO realized vol, you can sell straddles, strangles, or iron condors here and delta hedge with the underlying shares to capture the difference between current IV…
Jared Woodard is a registered commodity trading advisor who specializes in trading volatility as an asset class. With over a decade of experience trading options, futures ... Read More
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Monday, December 3, 2012
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