Twisted Volatility Rules the Markets
The sector to watch right now is financials which are pricing in more risk in the next 2 days than 9 days from now. What does that mean? It could that financials are giving off the first signs of volatility coming back into the market place. The other place to look is at bonds. What…
GroundHogs Day; What to do in a Low Volaility Climate
The stock market is at record low volatility. What does that mean? Well, if you're a premium seller you are selling some of the lowest premium ever recorded! That is why we have been using In Out Spreads to take directional exposure to the market. Believe me, I love non-directional strategies, but they just aren't…
The Search for Alpha
Where do you go for returns in this market place? Stocks are at all time highs. Bonds are at all time highs. Gold is up 25% in the last 6 months. Since May, we’ve heard negative equity calls from Stan Druckenmiller, George Soros, Carl Icahn, Jeff Gundlach and Bill Gross. Why? Because being short is…
Are the Central Banks Losing Control?
Another muddled day from the markets. There's so much liquidity that volatility is being squeezed out of the markets. The question we have to ask ourselves is what happens when the markets turn their backs on central banks around the world? At some point can the central banks throw everything they've got at the markets…
Signs of Volatility and a Trade Setup
Signs of volatility slowly slipping into the market. The overall market continues its sideways move as it has over the last 2 weeks. Tonight let's look at a few canaries in the coal mine and a trade set up...
Market Shrugs Off Bad Data
Even if you think bad news is good news because the Fed will start another round of QE the risk continues to be to the downside. I've made my entire trading career around selling volatility and collecting premium. I have never seen volatility this low. With all the risks out there in the market you…
Historical Volaility on the Rise, Volatility is Still Alive!
Index products are converging with one another and this yet another example that we are about to enter into a period of extreme volatility. Let's take a look at historical volatility over the last 20 years. Notice that all of the "all time highs" in the last 20 years also had just entered a phase…
What to Expect in AAPLs Earnings
It's earnings season and we kick off with the grand daddy of them all - AAPL! Many think that around earnings you should only sell premium. That is plain old stupid advice given by those that don't know any better. Let me tell you right now that trading earnings is not a bathrobe. One size…
Theoretical vs Historical Probabilities
Earnings season has kicked into high gear. How do you know whether or not to sell premium on high implied volatility stocks going into the earnings announcement? The trading technology out there focuses only on theoretical probabilities. However, what if you looked the actual historical probabilities based on historical data? Would theory match reality? TheoTrade…
Brazilian Contrarian Spread
It's not a rally, it's just a slow grind to the upside on very light volume. One interesting stat that came out today that the last 3 weeks saw the fastest collapse in the VIX in its history. There are plenty of contrarian candidates out there to choose from. Tonight let's set up a trade…