In our last issue, we discussed the newest volatility product – the futures that have recently begun trading on the Short-Term Volatility Index ($VXST). One of the things that arose from that discussion was that $VXST “overshoots” $VIX on both the upside and the downside. That is, in periods of high volatility (spike peaks, for example) $VXST rises to higher prices than $VIX does. Conversely, in periods of low volatility, $VXST falls farther than $VIX does.
In this MoneyShow.com interview, Lawrence G. McMillan discusses "how he trades volatility in today's markets and what strategies he has found to be the best." Larry talks about volatility ETFs and ETNs, the relationship between the VIX index and VIX futures, hedging, directional trading, and VIX spike peak buy signals. Watch the video at Moneyshow by clicking the image below.
For information on Fat Tail Distributions and The Empirical PDF refer to Enhancing Option Portfolio Returns Using Probability and Statistics - Part 4.
The stock market rally that began on February 3rd continues to persist, almost daily. The Standard & Poors 500 Index ($SPX) has only had two down days in that time. Even so, there is some question as to whether it has the strength to overcome what is stubborn resistance at 1850.
In this MoneyShow.com interview, Lawrence G. McMillan "discusses why selling naked puts does not have to be as dangerous as many option traders may think." Larry explains why he prefers put-selling to covered writing, how he locates put-selling opportunities and what situations to avoid. Watch the video at Moneyshow by clicking the image below.
The CBOE has launched what may prove to be a very useful product – short-term $VIX futures ($VXST). The feature article discusses their terms and their potential usage. Also, there are comparative charts with $VIX and $VXST. If volume is decent, this should be an excellent product.
A lot has happened in the past three weeks, but $SPX is literally unchanged from where it was at that time. A nearly 100-point round trip has taken place -- down, then up.
A move above 1850, to new highs, would be very bullish for $SPX. Although if it happens right away, it will be without support from many of our indicators. Meanwhile, there is minor support at 1800, and major support at 1740 (the February lows).
Equity-only put-call ratios continue to remain on sell signals.
At face value, it certainly seems as if this new volatility product, the CBOE Short-Term Volatility Index (symbol: $VXST) will be useful and successful. In this article, we are going to look at all of the details (at least as far as they have been disclosed by the CBOE), as well as make some projections about how these new products might trade. These projections will be based partly on theoretical historic data, as well as what we know about how $VIX futures and options trade.
For the Introduction, an explanation of Expected Value, and Expected Value and Option Strategies, and Determining the Probabilities refer to Enhancing Option Portfolio Returns Using Probability and Statistics - Part 1,
The stock market finally halted its straight-down tailspin. A strong rally generated some oversold buy signals which could carry the market back towards its declining 20-day moving average.
The $SPX chart is negative, in a pattern of lower highs and lower lows, and that is what makes it bearish.
Equity-only put-call ratios remains negative. Thursday's rally did not impede their march upward, and when put-call ratios are rising, that is bearish for stocks.