Tag Archive | "xle"

Should Market-Neutral Options Traders Diversify?

Monday, August 31, 2009


We generally restrict iron condor trades in our paid newsletter and managed accounts to index products. For those who prefer ETFs, we look at SPY, DIA, IWM, QQQQ; otherwise, SPX, RUT, NDX, DJX are bigger proxies, or on the futures side of things we’ll look at the Emini S&P 500 or Nasdaq 100 (ES and NQ). The reason we trade index products is that diversification reduces the impact of company-level surprises: an iron condor on, say, RIMM will get…

Beta and Risk in Troubled Markets, Part 2

Friday, January 16, 2009

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In this mini-series, we’re examining the value of beta as a measurement of risk.  In this post, we want to examine how the betas of some popular stocks, indexes, and ETFs changed during 2008 and especially during the fall crash.  First, we should clarify exactly what we’re measuring. What is beta? Beta is metric that describes the systemic risk of an asset or portfolio.  Because it is not possible to alleviate all risk by simple diversification, investors and traders…

Selling Premium on the Uncertainty in Oil

Thursday, July 24, 2008


The inverse relationship between oil prices and equity markets still seems intact: as crude has sold off over the past week, markets have lifted, and some analysts have even tried charting an hour-by-hour mapping of the correlation.  While we’re long-term bullish on oil (how could anyone not be?), we don’t anticipate an immediate or intense turn around in crude prices.  At the same time, while the price of oil could certainly drift a bit lower, we don’t foresee any catalysts…

Dow Slips Below 12k on Whatever Random News

Wednesday, June 18, 2008


We got a round of the correlation game started this afternoon, but it went nowhere fast: either headline writers are getting smarter, or today’s action is just too tenuous even for them! We realize we’ve never codified the rules of this game before, so: Get your officemates or pals together, and visit the financial homepage of any mainstream media outlet. Y! Finance, Bloomberg, even CNN Money will do. Scan the top headline. If the headline makes a dubious…

Exiting XLE Iron Condor After Some Good Defense

Wednesday, June 18, 2008


We published the following bonus trade for our members back on May 2: Buy to open XLE June 70 put Sell to open XLE June 72 put Sell to open XLE June 90 call Buy to open XLE June 92 call for a net credit of $0.47 or better. Anyone following this trade should have already exited – remember, we want to be out of any front month short options by Monday of expiration week at…

Inescapable Oil

Thursday, June 12, 2008


For mental health reasons, we hardly ever watch CNBC anymore. But glancing at it this afternoon, at one point we saw three separate live graphics displaying the price of crude oil. So much screen space was taken up by live oil trackers, there wasn’t enough space left to show the chart of whatever alternative energy company they were pumping. Was oil making a new high today? Did the U.S. unilaterally attack another country?  Did someone accidentally double-park in the Strait…

Our Broken Economy

Wednesday, June 11, 2008

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Forgive us a short rant this evening. This country is sick. When the three main engines of growth – consumer spending, real estate, and financial services – are broken, it’s just not possible to make any economic progress. And for just a moment, let’s think about how pathetic those key sectors really are. Cogent analysis of our per capita consumption requires some historical knowledge, since no contemporary people compares with our particular level of decadence. At least the Romans had…

There, That’s Better

Friday, June 6, 2008


This morning (premarket) we sent a note to subscribers laying out some hedging strategies, should they be needed in the event of a continued rally. Happily, not only was that note totally unnecessary, but today’s fantastic drop has us ideally positioned going into next week. As several members mentioned today in correspondence, the advantages of market-neutral trading strategies aren’t limited to markets that blandly drift sideways; being neutral is also a great way to avoid the day-to-day whiplash of the…

Ditch the Story

Tuesday, May 27, 2008


Times like this are tough for traders who insist that their positions have some kind of story supporting them. Technology is strong and probably always will be, but it’s not going back to dotcom levels; China, everybody’s favorite narrative for this decade, seems sort of broken; the agriculture and solar stocks look ready to return to earth after a high-flying run; even oil is looking overextended. And it’s still not safe to talk about real estate or financial stocks. Tim

VIX Wrapup, Variance Index, Very Uncertain Markets

Thursday, May 22, 2008

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Our VIX post from yesterday got picked up by two of the deans of options blogging, Adam Warner (shown) and Bill Luby: The Big Question for the VIX VIX Jumping the Shark? VIX and VIX (and thanks also to Abnormal Returns for the link) Not much to add in response to all this, except to agree that the increased coverage of this one instrument doesn’t change the fact that it still definitely serves a purpose. When…


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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