Over 60 companies will undergo the "lock-up test" between now and the end of 2012, including Yelp (YELP), Splunk (SPLK) and Carlyle Group (CG). One assumes shareholders and companies hope the stocks will do better than those of Facebook (FB) and Angie's List (ANGI), which plummeted last week following the end of lock-up periods. For a list of expiration dates, see here. [View news story]
Market recap: With earnings season largely over and no U.S. economic reports on the calendar, stocks took a breather to consolidate gains after the recent run-up. A weak reading on Japan's economic growth and concerns over China kept a lid on the action all day. Most key S&P sectors were in the red, led by materials. NYSE decliners led advancers seven to six. [View news story]
A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
I'd like to thank the authors of this article and the comments for all of the good ideas and details of applying this strategy on real trades. In return, I shall offer this:
The very best play I have found using this idea is GLD before Fed meetings. I have played this so many times, I have identified Monday mid-day to be the ideal time to buy, then sell 1 hour before the FOMC announcement on Wednesday. I have found that wider strangles make higher % gains, but also have higher commissions (more contracts), so you have to find your sweet spot. Mine is usually $5 on either side of ATM.
The great thing is you can play this 6 times a year instead of 4. I have made around 20% on this almost every time, more when GLD moves pre-annoucement. The other great thing about this play is that the bid/ask spread is tiny, sometimes only 1 or 2 pennies, which totally eliminates that worry.
Profiting From The 'Pre-FOMC Drift' [View article]
Dr Kris - thanks for taking the time to pull together this data, it is very useful and interesting. However, I disagree with your conclusions.
My conclusion, after viewing your data, is that your 5-year averages only look profitable because this worked well in 2008 and 2009. This has been a 50/50 bet for the past two years with very little average profit.
So You Want To Trade Volatility: Understanding Contango [View article]
Thanks dd. Ok, so the Q2 is an 8/21 expiry and the U2 is a 9/18 expiry. That's 66% weight on the one with 25 days to go, and 34% weight on the one with 53 days to go, for a weighted average of 34.5 days out, or a guess at what VIX will be a little over a month from now.
So to backwardate, you need the expectation that VIX will be lower in mid-Sept than in mid-Aug. That usually only happens when spot VIX goes over 25 or 30.
So You Want To Trade Volatility: Understanding Contango [View article]
^They are a good short, but you want to do it when VIX is above 20, not now with VIX at 16. The main downside is that it's nearly impossible to find shares to short since a lot of people know about this. And if you go to puts instead, they are very expensive and decay as fast as the underlying drops.
Josh - it's my understanding that VXX, TVIX, and UVXY maintain a 2-month volatility average. They hold a mix of 1-month, 2-month, and 3-month futures, and are constantly rolling from the 1-month into the 3-month (Q2, U2, V2 from your link). Am I wrong, or are they really just 1-month and 2-month? Do you have a link?
Today's move by European leaders to allow the direct use of bailout funds to recapitalize banks does nothing to help solve the region's real problem, which is high debt, observes Jim Rogers. Finding a way to get the banks to borrow even more money doesn't solve the problem, it just makes it worse. “People need to stop spending money they don’t have," Rogers says. "The solution to too much debt is not more debt." [View news story]
Jim Rogers is usually right, it just takes about 4 years on average for his ideas to come to fruition.
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Over 60 companies will undergo the "lock-up test" between now and the end of 2012, including Yelp (YELP), Splunk (SPLK) and Carlyle Group (CG). One assumes shareholders and companies hope the stocks will do better than those of Facebook (FB) and Angie's List (ANGI), which plummeted last week following the end of lock-up periods. For a list of expiration dates, see here. [View news story]
Clayton Williams Energy: Small-Cap Oil & Gas Company With Strong Earnings [View article]
Market recap: With earnings season largely over and no U.S. economic reports on the calendar, stocks took a breather to consolidate gains after the recent run-up. A weak reading on Japan's economic growth and concerns over China kept a lid on the action all day. Most key S&P sectors were in the red, led by materials. NYSE decliners led advancers seven to six. [View news story]
A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
I don't recommend shorting the strangle for the IV crash though, the GLD moves post-Fed are big more often than not.
A Good Option Strategy: Exploiting Earnings - Associated Rising Volatility [View article]
The very best play I have found using this idea is GLD before Fed meetings. I have played this so many times, I have identified Monday mid-day to be the ideal time to buy, then sell 1 hour before the FOMC announcement on Wednesday. I have found that wider strangles make higher % gains, but also have higher commissions (more contracts), so you have to find your sweet spot. Mine is usually $5 on either side of ATM.
The great thing is you can play this 6 times a year instead of 4. I have made around 20% on this almost every time, more when GLD moves pre-annoucement. The other great thing about this play is that the bid/ask spread is tiny, sometimes only 1 or 2 pennies, which totally eliminates that worry.
So You Want To Trade Volatility: Understanding Backwardation [View article]
Profiting From The 'Pre-FOMC Drift' [View article]
My conclusion, after viewing your data, is that your 5-year averages only look profitable because this worked well in 2008 and 2009. This has been a 50/50 bet for the past two years with very little average profit.
So You Want To Trade Volatility: Understanding Contango [View article]
So to backwardate, you need the expectation that VIX will be lower in mid-Sept than in mid-Aug. That usually only happens when spot VIX goes over 25 or 30.
So You Want To Trade Volatility: Understanding Contango [View article]
Josh - it's my understanding that VXX, TVIX, and UVXY maintain a 2-month volatility average. They hold a mix of 1-month, 2-month, and 3-month futures, and are constantly rolling from the 1-month into the 3-month (Q2, U2, V2 from your link). Am I wrong, or are they really just 1-month and 2-month? Do you have a link?
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Today's move by European leaders to allow the direct use of bailout funds to recapitalize banks does nothing to help solve the region's real problem, which is high debt, observes Jim Rogers. Finding a way to get the banks to borrow even more money doesn't solve the problem, it just makes it worse. “People need to stop spending money they don’t have," Rogers says. "The solution to too much debt is not more debt." [View news story]
So You Want To Trade Volatility? [View article]
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