All Entries Tagged With: "options"
VIX to VXV Ratio Nears All-Time Lows
A few days ago I pointed out that while the VIX has fallen since late November, it’s certainly not nearing all-time lows (yet). And I agree with some who suggest that may not mean much. After all, those all-time VIX lows were set years ago before the financial crisis. But the ratio of the VIX [...]
Options Activity and Offerings Keep Growing (NDAQ, CBOE, OXPS)
Today, CBOE Holdings (NASDAQ: CBOE) is the exchange thought of by many as synonymous with options trading. In the past, it was the Philadelphia exchange. For the future, NASDAQ OMX Group (NASDAQ: NDAQ) may be trying to change that, but name recognition is not what really seems to matter right now. Regardless of which exchange [...]
GM Options: Implied Volatility on Day One
When today’s implied volatility for options on a stock is higher than yesterday’s, that may represent traders’ changing views on future volatility. But what if there was no implied volatility yesterday? Although the new General Motors (GM) stock began trading on November 18, options didn’t begin trading until Monday the 29th – so nobody really [...]
The Option Time Premium Curve: Time vs. Intrinsic Value
There are always tradeoffs when it comes to trading options. The more in the money the option, the higher the price – at least in theory. But, deep in the money options usually don’t have as much time premium embedded in them as the ones that are closer to being at the money. One way [...]
Implied Correlation: Enough Open Interest to Measure?
Thanks to Adam Warner at the Daily Options Report for linking to my article on CBOE’s implied correlation data – and my own “weighted” average of this data. The implied correlation indices measure the correlation between the implied volatility of long-term S&P 500 index options and the implied volatilities of long-term options for the top [...]
The Put/Call Ratio: What Options Traders Are Thinking
Andrew Hart’s recent article “Options Traders Call for Market Sell-Off” demonstrates how traders use the put/call ratio – a measurement of the number of put options traded relative to call options. This is generally viewed as a contrarian indicator. More calls being traded is often viewed as a short-term bearish signal, while more puts being [...]
CBOE: Please Add “Mini” Options To Expensive Stocks
Tony made a good point on my last post on expensive stocks: I would imagine lower stock prices would make certain options strategies (like covered calls) more approachable for some investors. It sure would – and that’s why I’m asking the CBOE to introduce “mini-options.” A company like Google (GOOG) may never want to split [...]
A Trader’s First Weekly Options Play
Bill Luby at “VIX And More“discusses the first trade he’s made using weekly options – selling a short straddle on the iShares Russell 2000 Index ETF (IWM). He points out that he wouldn’t have made the trade using monthly options. When I looked at the available options, the weeklys almost jumped off of the page, [...]
Fair Warning: LEAPS Can Go POOF!
I learned about one risk of buying LEAPS the hard way. LEAPS (Long-Term Equity Anticipation Securities) are options that expire in a year or more. That means they generally have a lot of time premium built into them. But there’s always a chance that LEAPS can go POOF. POOF stands for “Premium Obviously Obliterated Forever” [...]
Weighing Your Options: How Puts and Calls Trade Together
When the market is plunging – and people are presumably scrambling to buy put options, those options get expensive. That’s sort of what implied volatility measures, the relative price of options based on demand. The more “panic” there is in the market, the more expensive it is to either protect your stock with puts – [...]
