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VXX

THE WEEK AHEAD: EARNINGS APLENTY (PLUS THAT LITTLE SHUT-DOWN)Earnings season is in full swing, with a bevvy of announcements: NFLX: announces on Monday after market close, with a rank of 79 and a background of 44. VZ: Tuesday, before market open -- rank 80/background 25. PG: Tuesday, before market open -- rank 86/background 17. GE: Wednesday, before market open -- rank 100/background 39. CAT: Thursday, before market open -- rank 84/background 30. CELG: Thursday, before market open -- rank 78/background 36. UNP: Thursday, before market open -- rank 78/background 30. INTC: Thursday, after market close -- rank 97/background 31. SBUX: Thursday, after market close -- rank 90/background 26. ABBV: Friday, before market open -- rank 78/background 26. At the moment, none of these precisely meet my criteria for a play (rank >70; background >50), but NFLX is fairly close and may frisk up during the regular session. Preliminarily, the Jan 26th (5 days 'til expiry) 205/240 is paying 4.66 at the door with break evens wide of the expected. A defined risk setup with the same strikes -- the 200/205/240/245 iron condor pays 1.72, with a max loss of 3.28 and break evens of 203.28 and 241.72 -- basically right at the expected move on both sides. On the exchange-traded funds front, the top three funds ranked by implied volatility rank or percentile are: FXI (75/22), XLB (79/16), and XLU (86/17). As with earnings, these don't meet my criteria for a play (rank >70; back ground >35), but it's always worth knowing what is potentially on the move or might set up for a play given the right conditions. With volatility products, I'm basically hand-sitting here (there was no weekly expiry to take advantage of last week). I added a few spreads on that pop and don't want to go overboard in the event that there is further market unrest in connection with the government shut-down. Although the VXST/VIX ratio has trundled down to below 1.00, it still remains fairly high at .924 and VVIX is still >100 (101.59). Instead, I'm looking to scratch out the most at-risk spreads I have on (VXX 25.5/28.5's, generally) if I get an opportunity to do so, since that uptick got me in at better strikes ... .
NASDAQ:NFLX
by NaughtyPines
THE WEEK AHEAD: IBM, SLB, KMI EARNINGS; XLU, SMH, IYR, EWW, VXXEARNINGS The earnings on tap aren't looking very enticing to me, as I generally look at getting in on these where the implied volatility rank is >70% and the background implied volatility is >50%. However, they might be worth watching running into earnings to see if implied ramps up. KMI (implied volatility rank 79/implied volatility 30) announces earnings on the 17th after market close. The January 19th expiry's implied volatility is at 40%, with the 26th's at 31.4% (a 27.5% potential contraction). Given the underlying's price, it's probably best to go short straddle. Unfortunately, the Jan 19th's 19.5 short straddle isn't paying much -- .70 at the mid, with break evens clear of the expected move. Given what that's paying, a defined risk play won't pay. IBM (implied volatility rank 93/implied volatility 26) announces on the 18th after market close. January 19th's implied's at 43.2; the 26th's at 31.3 (38.0% potential contraction). The January 19th 157.5/170 short strangle (23 delta) is paying 2.30 at the mid; the 152.5/157.5/170/175 iron condor's only paying 1.49 (<1/3rd wing width), so would probably pass on a defined unless implied volatility frisks up running into earnings. SLB (rank 100/implied 27) announces on the 19th before market open. January 19th's implied is 35.4 vs. Jan 26th's of 27.9 (26.9% potential contraction). The 19th's 76/80 short strangle's paying 1.07 at the mid. Defined -- not worth it. NON-EARNINGS Another area in which implied volatility rank makes potential plays look promising, but where background implied volatility isn't up to stuff. Currently, there are no exchange-traded funds whose implied volatility rank is in the upper one-quarter of so of where it's been over the past year and where background implied is greater than 35%. For what it's worth, though, here are the top ones: XLU (73/15), SMH (59/23), IYR (57/14), and EWW (51/24). VOLATILITY PRODUCTS Recently I've been working VXX* in two ways: (1) "price agnostic," where I enter either a long put vertical or short call vertical when the next weekly expiry open on Thursday or Friday; and (2) on pops where the VXST/VIX ratio is >1.0 (the higher the better). Unfortunately, it's tough to forecast a pop (although I've seen people repeatedly make the attempt), so you just have to set up an alert to trigger on a VXST/VIX ratio print of >1.00 or a VVIX print of >110 and keep powder dry for when it happens. * -- I've been waiting for UVXY to reverse split on the notion that a 1/2 strike of movement in an 8.67 (UVXY Friday close price) underlying is somewhat more of a heavy lift than a 1/2 strike of movement in a 25.85 one, even though UVXY is leveraged.
NYSE:IBM
by NaughtyPines
1
TRADE IDEA: VXX FEB 9TH 27/30 LONG PUT VERTICALAnother mechanical short volatility trade put on in the weeklies in VXX (while I wait for UVXY to do "the splits"). The February 9th weekly should open tomorrow and with VXX trading slightly below the 28 handle, I'm going to look at filling some 28/31's in that expiry for a 2.25/contract debit. Given the fact that the February 16th 28/31's are trading around that mark, I think my chances for a fill at 2.25 are decent ... . If I can't get filled for less than 2.30 for that setup, I may cave in and go with the 27.50/30.5's ... .
CBOE:VXXShort
by NaughtyPines
2
OPENING: VXX FEB 16TH 28/31 LONG PUT VERTICAL... for a 2.28/contract debit. Frankly, was somewhat surprised that this appeared to have a 2.27 mid at open, since 28 is right at the money, and the market doesn't usually accommodate that kind of fill unless the short put is deeper ... . I was going to wait for the February 9th's to open, but I have a "spot" within the nooks and crannies of my February 16th 27/29 2x2 long put vertical to squeeze this in here and if someone's going to fill me for 2.30 or less on a three-wide, well, who am I to question ... .
CBOE:VXXShort
by NaughtyPines
THE WEEK, MONTHS AHEAD: VIX, VXX, UVXY, SVXYAs 2017 comes to a close as one of -- if not the -- lowest volatility years ever on record for the S&P and Nasdaq, I'm not hopeful that this low volatility won't continue for some time to come. To be honest, though, no one really has any way of knowing or predicting volatility going forward, except in the most obtuse of ways, such as forecasting market performance over a given time period or pointing out exogenous risks, which can in turn drive the volatility environment. Since predicting volatility going forward is a total crap shoot to me, I feel it's best to play the ball "from where it lies" and to adapt when the environment changes, rather than trying to predict when and how much it's going to change. With this in mind, I plan to continue to keep doing what appears to be working (and, really, what has always worked, albeit with some periodic bumps in the road): shorting volatility products that have been the gift that kept giving in 2017, as much as being bullish broad market (short puts, short put verts, long call verts, long calls) was pretty much the gift that kept on giving in the same time period. At some point, this strategy will in all likelihood cease to work so well; until that time, it's just a plain time saver not to worry about checking the high implied volatility screener on a daily basis, since -- in all likelihood -- I'm not going to find anything there that meets my basic premium-selling criteria until things change their tune in substantial fashion from a volatility perspective. Previously, I religiously checked that screener on a daily basis (I probably still will; old habits die hard), but my guess is that the markets will continue to make that mechanical approach to premium selling in this market very short work, as that process has repetitively yielded very few worthwhile candidates for premium selling for weeks (if not months) on end in the stuff I like to trade -- broad market and sector exchange traded funds.* This week, I foresee only doing my weekly VXX long put vertical trade; the way it's looking, it'll be the Feb 9th** 27/30's or 27.5/30.5's given where VXX is at now. As previously pointed out, I'm hesitant to wade into UVXY here given its lowness to the deck and the likelihood it'll reverse split soon. The reverse split is not a "deal killer," but rather just a choice not to be in some funky, non-standard options contracts post-split. As always, I'll keep an eye out for any VXST/VIX >1.00 or VVIX >110 pops; it's possible that we could get one as investors opt for taking tax losses in their crap piles before the year's done and/or reposition anew in 2018 ... . * -- Naturally, I'm way more picky than some as to when sell premium. I expect certain things out of premium selling setups profit-wise relative to accompanying risk, and if those things aren't there, I'm just not going to play the market that way. The alternative approach is to take what the market gives you, regardless of implied volatility; this approach has its merits (cash flow, for one). After all, having no premium selling plays on in this market generates "nothing" cash flow; having something on generates something; and something is always greater than nothing. ** -- Feb 9th should open up on Thursday, if I'm not mistaken.
CBOE:VIXShort
by NaughtyPines
3
OPENING: VXX JAN 26TH 30/33 LONG PUT VERTICAL... for a 2.22/contract debit. Metrics: Probability of Profit: 64% Max Profit: $78/contract Max Loss: $222/contract Break Even: 30.78 Notes: With UVXY sliding below 12, it's losing a bit of granularity here due to its size, so I'm switching over to VXX for a bit until UVXY reverse splits (which usually occurs around $8-$9) (i.e., it's a bigger move for UVXY to move a half strike than for VXX to move a half strike). I'll continue to put these plays on weekly in the expiry closest to 45 days wherever price lies, but also take advantage of VXST/VIX >1.00 pops with additional spreads as opportunities present themselves. As with all spreads, I generally will pull them off at 50% max profit ... .
CBOE:VXXShort
by NaughtyPines
TRADE IDEA: VXX FEB 19TH 27/29 LONG PUT VERTICALSince there's no February 2nd weekly available for me to use, I'm going out to the monthly to put on my weekly short volatility product play. Here, I'm going narrower with the spread, but doubling the number of contracts to show how to scale trade size with both width of the spread and the number of contracts. As compared to the 3-wides, which I normally get filled for around 2.25/contract and that have a max profit potential of .75/contract (33% ROC), I'm shooting for a 1.34/contract fill for the two-wides and a .66/contract max profit potential (49.25% ROC). Since I'm using two contracts instead of one, max loss is 2.68 per 2x2 as compared to the 2.25 for the 1x3, but max profit is 1.32 versus .75.
CBOE:VXXShort
by NaughtyPines
Volatility (VIX) - 1D - The range gets SMALLER, the risk GREATERIf you like this idea leave a like and follow me to get all of my updates :) I would love to talk to you so send me a message or comment! Underlying: VIX Time frame: 1D What Has Happened So Far: For anyone that is interested in seeing the FULL post click here. I have linked it because the post is far too long to put here. What am I Looking to Happen: As we know that the VIX historic average is 18.75 since 2004 we know that current levels are WELL below that, so we can look at opportunities to buy. To do this I looked at what the MACD has been doing. As you can see on the chart even the MACD has been narrowing which tells me there will be a break out. As this product (VIX) we are looking at EXPLODES to the upside, a lot of people could get hurt in this and the stock market. I feel that once price begins to break out of this range you will see a huge increase. Personally I am shorting the stock market rather than buying or selling VIX options as the VIX can do more damage there. I have linked my stock index ideas below. Target Profit: NA as this is to show how fear is being under-valued Stop Loss: NA as this is to show how fear is being under-valued If you like this idea leave a like and follow me to get all of my updates :) I would love to talk to you so send me a message or comment!
TVC:VIXLong
by SocialTrading
THE WEEK AHEAD: COST, BBRY, TEVA, MATEarnings COST announces earnings on Thursday after market close. With a background implied volatility of 21%, it doesn't meet my basic earnings play sniff test, but naturally that can increase running into earnings, so it may be worth keeping an eye on. Preliminarily, the Oct 20th 158/170 short strangle currently pays 2.21 at the mid with break evens around the 1 standard deviation line for both sides. The defined risk version of that play, a 155/158/170/173 iron condor, brings in 1.00, with break evens wide of the expected on both sides. (I looked at using the Oct 13th expiry to take maximum advantage of any vol contraction post-earnings, but strikes where I would want to set up my tent were less than ideal). Non-Earnings Post-earnings, BBRY implied volatility remains fairly high at 46.25%, placing it in the upper one quarter of the where it's been over the past 52 weeks. Given the size of the underlying, the only play that makes sense from a nondirectional standpoint is a Nov 17th 11 short straddle, which is paying 1.24 at the mid with break evens at 9.75 and 12.25. The generic drug maker TEVA's implied is at 51.31%, which is around the middle of its range over the past 52. It's not quite where I'd like to see it, and the Nov 17th 15/20 short strangle is only paying .80 at the mid with break evens short of the 1 standard deviation line In contrast, the Nov 17th 17.5 short straddle is paying 2.46 with break evens wide of the expected on both sides, but the comparable iron fly -- a Nov 17th 12.5/17.5/17.5/22.5 only pays 2.20, short of the one-quarter of the width of the longs I like to get out of those. For those looking to strategically acquire shares or to just sell directional premium, the 30 delta Nov 10th 16 short put is paying .52 at the mid with a break even of 15.48. Toy maker MAT has the right rank/implied metrics here, but with earnings a mere 17 days out, the preference is wait to put on a play shortly before earnings to take maximum advantage of vol contraction. Exchange-Traded Funds These are my bread and butter trades, but there's little bread and no butter here. The highest implied volatility exchange traded fund is EWZ at 31.43%, but it's in the lower one-fourth of where it's been over the past year. GDXJ follows with 29.93%; XOP, 25.96%; GDX, 23.25%; and OIH, 24.21%, all at the bottom end of their ranges and, in any event, below 35% implied generally. VIX et al. VIX finished Friday at sub-10 levels and its "little buddies" (VXX, UVXY, SVXY) continue to be cannibalized by contango. Sit on your hands for any VIX "Term Structure" trade (the first /VX future trading at >16 is in April) and wait for a VXST/VIX ratio pop to greater than 1.15 (Friday finish: 83.6) to put on plays in VXX, UVXY, and/or SVXY.
NASDAQ:COST
by NaughtyPines
VIX (Volatility) - 1D - Average Historic PriceIf you like this idea leave a like and follow me to get all of my updates :) I would love to talk to you so send me a message! PLEASE NOTE I HAVE REPOSTED THIS AS I HAVE A LOT MORE FOLLOWERS For Full Post Click Here Present fear of future uncertainty is over-stated. What do I mean by this? People's fear of what the future might hold is always exaggerated. Do you remember the time you were going to go on your first date and you were petrified you would find a way to ruin it? Well it most likely didn't end up that bad and you probably went on many more; unless you were scarred for life. This fact applies to us all around the world and in particular, the financial markets. Granted, there are exceptions to this for example extremely low volatility environments. We obtained data from 2004 through to 2017 and looked at some of the important data that included VIX open, close, high and low for each day. The first set of data we looked at was the average percentage increase/decrease each day. This was done by taking the close of each day, subtracting the open, dividing it by the open and then multiplying by 100. For example; (C - O) / O * 100 15 - 13  / 13 * 100 = 15.38% increase * Using all of the data points since 2004, the average change each day was -0.42%. We then looked at the distribution of VIX highs each day to see the highest points. We discovered; . Very few highs occurred under 10 . The majority were between 10 and 20 . From 20 - 80+ we saw a significant decrease in the number of occurrences. 10+ Occurs 99.99855% 20+ Occurs 34.94% 30+ Occurs 9.54% 40+ Occurs 4.67% 50+ Occurs 2.03% 60+ Occurs 1.04% 70+ Occurs 0.46% 80+ Occurs 0.18% As we know that on average the VIX declines in value by -0.42% we can factor that into our decision making. Let's use an example to illustrate this; John is looking for a security he can put $250,000 into and has two options 1. VIX options (a volatility product) or 2. the S&P 500. VIX options on average lose -0.42% a day and the S&P 500 gains 0.04% a day. Straight away the S&P 500 looks a lot more attractive than the VIX. Although the daily gains in the VIX tend to be a lot bigger, the overall decay will eat away at your profits. So how can traders and investors make money from VIX? By trading VIX options when the prices reach a point considered overvalued. As we also know that the average price of VIX from 2004 - 2017 is around 18.75 and assume that the VIX price is mean reverting we can determine prices significantly under 18.75 are undervalued and prices significantly over 18.75 are overvalued. This then begs the question, how do you determine what is significantly overvalued and what is not. In order to see what is overvalued we can look at standard deviations. Standard deviations show how certain data points differ from the mean of those data points. In this case a 1 standard deviation would contain roughly 68% of the data points. 2 standard deviations would contain 95% and 3 standard deviations would contain 99.7%. So from this we know that if prices go into the 2 or 3 standard deviation bracket, we could see the next data points move back into that 1 standard deviation bracket. Please keep in mind though, VIX when it starts to increase in value does so at a phenomenal speed.
TVC:VIX
by SocialTrading
5
Understanding VIX DataThis post is very long so, for the full in-depth post you can click here. You can also get diagrams there. The VIX is a volatility index that shows what the market expects 30-day volatility to be. It is calculated through the implied volatility on S&P 500 Index options. The VIX typically has a negative correlation to the overall stock markets, i.e. when the S&P 500 increases, VIX decreases. How can it be used? As this is a product that is “forward looking” we can try to gauge where it will be in the short-term. How does the VIX move? Looking at data from 2004 to make assumptions. Present fear of future uncertainty is over-stated. What do I mean by this? People’s fear of what the future might hold is always exaggerated. Do you remember the time you were going to go on your first date and you were petrified you would find a way to ruin it? Well it most likely didn’t end up that bad and you probably went on many more; unless you were scarred for life. This fact applies to us all around the world and in particular, the financial markets. Granted, there are exceptions to this for example extremely low volatility environments. If you were to look at the VIX price on a chart you will see that there is a current (spot) price and a “future” price. The “future price” is inclining and this is partly because the further out we go the more uncertainty there is. As we start getting closer to that future date the price gets closer to the spot price as the fear starts to subside. Imagine point 6 moving to point 5, point 5 moves to point 4 and so on. Data from 2004 – 2017 We obtained data from 2004 through to 2017 and looked at some of the important data that included VIX open, close, high and low for each day. The first set of data we looked at was the average percentage increase/decrease each day. This was done by taking the close of each day, subtracting the open, dividing it by the open and then multiplying by 100. For example; (C – O) / O * 100 15 – 13 / 13 * 100 = 15.38% increase * Using all of the data points since 2004, the average change each day was -0.42%. We then looked at the distribution of VIX highs each day to see the highest points. We discovered; . Very few highs occurred under 10 . The majority were between 10 and 20 . From 20 – 80+ we saw a significant decrease in the number of occurrences. Furthermore the probabilities of the price being x are listed below. 10+ Occurs 99.99855% 20+ Occurs 34.94% 30+ Occurs 9.54% 40+ Occurs 4.67% 50+ Occurs 2.03% 60+ Occurs 1.04% 70+ Occurs 0.46% 80+ Occurs 0.18% How Can The Above Data Be Used In Decision Making? As we know that on average the VIX declines in value by -0.42% we can factor that into our decision making. Let’s use an example to illustrate this; John is looking for a security he can put $250,000 into and has two options 1. VIX options (a volatility product) or 2. the S&P 500. VIX options on average lose -0.42% a day and the S&P 500 gains 0.04% a day. Straight away the S&P 500 looks a lot more attractive than the VIX. Although the daily gains in the VIX tend to be a lot bigger, the overall decay will eat away at your profits. So how can traders and investors make money from VIX? By trading VIX options when the prices reach a point considered overvalued. As we also know that the average price of VIX from 2004 – 2017 is around 18.75 and assume that the VIX price is mean reverting we can determine prices significantly under 18.75 are undervalued and prices significantly over 18.75 are overvalued. This then begs the question, how do you determine what is significantly overvalued and what is not. POST CONTINUED IN IDEA UPDATES
TVC:VIX
by SocialTrading
3
THE WEEK AHEAD: WATCHING VIX AND ITS "LITTLE BUDDIES"With VIX settling at around 10 on Friday, there's little that catches my attention here in terms of pure premium selling. Currently, no individual underlying is up to my high implied volatility rank/high implied volatility standards and neither is any exchange-traded fund. Naturally, I'm beginning to sound like a broken record here. I mean, how many different ways can I describe this protracted low volatility market with descriptors such as the current market's being a "wasteland for premium selling," there being a "paucity of premium-selling plays," or that there is a lack of "sexiness" or "juice" in the market as far as selling premium is concerned. My options are either: (a) torture myself by putting on low probability of profit, low credit received at the door premium selling plays; (b) pursue low volatility strategies such as calendars and diagonals; or (c) wait with mounds of cash (I exaggerate with the "mounds" part) on the sidelines until volatility increases. To me, option (a) makes little sense here, since I'd be opting for low quality stuff just to have plays on or to "increase occurrences." It may just be me, but I like to have numerous quality occurrences on, not numerous crappy ones, and I guarantee you'll be in numerous low quality premium selling plays if you keep putting them on here and the market keeps doing what it's been doing (going up ... incessantly). This is particularly so if you continue to go nondirectional (i.e., short strangle/iron condor/iron fly) in this low volatility environment and in skewed instruments like SPY, IWM, QQQ, and the DIAs, where having call side risk on has just been a terribly "unfriendly" trade for several months now. That being said, things can change in an instant with an exogenous risk event, which we've been unexpectedly met with on several occasions during the past couple of months -- only to have the dip buyers promptly wade back in, lending credence to the fiction that we're in an endless bull market handicapped by an inability to undertake any meaningful correction such that the stories regarding this being a "bubbly" market valuation-wise entirely evaporate. I've done a few option (b) trades (SPY, IWM, GLD calendars), both small and with plenty of time to work out. But for them, I'd be almost entirely flat here. To a certain extent, I regard them as largely "engagement" trades with limited likelihood of huge gains, but also limited likelihood of huge pain, since they were put on for debits, my risk is defined, and I pretty much know how much is on the line should they not work out. In other words, they're just there to keep me from going entirely bat crazy bonkers while I wait for sufficient volatility to take advantage of the market with my go-to strategies -- short strangles, iron condors, and iron flies. The calendars beat a poke in the eye with a sharp stick, but not by much. Barring productive market behavior in SPY et al., I'm basically watching VIX here, along with its "little buddies" -- VXX, UVXY, and SVXY -- for an opportunity to add something there in the short-term or farther out in time. (See Posts below).
TVC:VIX
by NaughtyPines
6
OPENING: VXX OCT 20TH 52/54 SHORT CALL VERT... for a .50 credit. Probability of Profit: 63% Max Profit: $50/contract Max Loss: $150/contract Break Even: 52.50 Notes: Setting this up at the 50 delta strike. The set up isn't that "sexy" in terms of premium collected versus max loss, but going small on this minor VIX pop. Would prefer going 50 delta short call vert in this instrument on corresponding /VX front month at 16 or greater, but ain't getting any younger ... .
CBOE:VXXShort
by NaughtyPines
3