Tag Archive | "XLF"

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…

The Next Shoe to Drop in Banking

Wednesday, August 19, 2009


The financial sector of the U.S. economy has had nearly a year to address the problems that exacerbated the crisis last fall. But many observers think that the banks haven’t done enough, and that another round of trouble may be developing for the sector. I will outline some of those concerns and then suggest some ways to use options to profit if there is indeed another shoe to drop in banking. The Thesis The primary obstacle facing large banks is…

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…

Beta and Risk in Troubled Markets, Part 1

Thursday, January 15, 2009

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The old maxim is that when major market movements occur, all betas go to one.  We decided to look at the beta for a few stocks during 2008 to determine whether and to what extent that maxim held true. The reason we wanted to investigate the beta exhibited during 2008 – and especially during the fall crash – is that investors and traders use beta as a measurement of how risky an asset is relative to the market, with the…

Warped, Frustrated Old Banks

Thursday, December 18, 2008


Mr. Potter: [to George Bailey] Look at you. You used to be so cocky. You were going to go out and conquer the world. You once called me “a warped, frustrated, old man!” What are you but a warped, frustrated young man? A miserable little clerk crawling in here on your hands and knees and begging for help. No securities, no stocks, no bonds. Nothin’ but a miserable little $500 equity in a life insurance policy.…

Space Aliens with Hoards of Cash

Friday, September 5, 2008


As we said in a premarket note this morning to subscribers, several of our volatility-based indicators flashed buy signals, and after the morning washout, markets rallied back above yesterday’s lows.  Today’s signal was good for at least 11 S&P futures points off the open, and we expect to see a bit of positive follow-through next week. The headline story of 2008 is still holding true: a rally in financial stocks is still a necessary but not a sufficient condition for…

Midweek Smeagol Reading

Wednesday, August 20, 2008


In a note yesterday morning to members, we were looking for an oversold rally, and said rally still has yet to materialize in any big way.  We still think the S&P will close the week closer to 1300 than to 1250, but that’s a conviction loosely held. The two biggest questions on our minds for the remainder of the week are: Will the financials stop dragging everybody down?  $BIX, $BKX, XLF all had a good day today, but they…

Bull Markets Don’t Rally 300 Points

Wednesday, August 6, 2008


Wiser heads than ours are still thinking hard about the unrelenting credit troubles, the generally absurd situations of FNM and FRE, and the possibility that this time, socialism for the rich (that broad set of taxpayer-funded free love, free money policies available to large companies and major investors, but not to ordinary people) might not pull us through.  If our bearish data points from yesterday weren’t enough, here are some more: There was a big divergence in…

Incredulous Bears We Are

Tuesday, August 5, 2008


In spite of all the fashionable buying today, our outlook over the next week or so isn’t particularly bullish, and here are some reasons why: Historically, it is really uncommon for the market to move up 2% the morning before a Fed announcement… …and in general, these big Fed rallies tend to end either in boredom or in tears over the following several trading days.  Over the past decade, these kinds of flashy rallies have been sustained less than…

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…


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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