Asymmetric Leverage If you lose 50% in a trade, you’ll need a 100% return on the next trade, just to breakeven. Here is the math: Required Gain to Breakeven = 1 / (1-loss in %) – 1 This is one of our favorite visualizations. It is plotting IV (x-axis) against IV Rank (y-axis). Translation: Top … Continued
A new free tool enables investors to see the future of their trades tastytrade is offering investors a new free tool called Lookback that provides a risk-free environment to test options trading strategies. New traders can use it as “paper trading” by queuing up a trading idea and seeing how it would have performed over … Continued
Understanding volatility helps traders manage risk. Here’s how sectors and indexes compare for their tendency to move in price. Volatility is synonymous with the probability of movement. Consistently volatile sectors, such as oil services (OIH), oil and gas exploration (XOP) and gold miners (GDXJ), have a high probability of movement. Other sectors, including consumerstaples (XLP), … Continued
BITO is not a suitable long-term investment The ProShares Bitcoin ETF (BITO) started trading today. According to the prospectus, it does not invest directly in bitcoin. Instead it uses the futures contracts. Here is why this particular ETF is not a suitable long term investment—it works similar to USO and UNG (take a look at … Continued
Earnings: Daily Breakdown Earning Season “officially” begins with the big banks. Expect to see the bulk of earnings at the end of this month and beginning of next. One way to play earning stocks is to look for a “volatility crush” that tends to happen immediately after the release of the earning announcement. This is … Continued
Most and Least Volatile Equity ETFs Below we sorted the sector and index ETFs from high to low for each week. Oil ETFs (not surprisingly) are consistently, week after week, the most volatile. Healthcare, the S&P 500, and Staples are the least volatile. For several weeks, the Nasdaq (QQQ) were less volatile than Utilities (XLU)—but … Continued
Metals Metals are moving. Perhaps this can be explained by metals becoming less attractive as Treasury Yields are increasing. Metals, after all, are non-interest bearing. This can be seen below in the correlation matrix. The correlation of the 2-year, 10-year, and 30-year Treasury yields is compared in the matrix versus gold and silver. Notice the … Continued
Monday Sector ETF Slumps With last Monday’s large sell off, the hardest hit sectors in the S&P 500 were Energy, Financials and Consumer Discretionary. Volatility Curve Below is a current snapshot of the VIX futures. /VX and /VXM are the VIX and Micro-VIX futures respectively. /VX is $1000 per 1 move, whereas /VXM is $100 … Continued
Cryptos have a weak relationship with the major equity indexes. Anything between -0.15 and 0.15 is considered to have no relationship. Digital currency’s correlation with the S&P 500 is 0.13, and its correlation with the Russell 2000 is 0.05. The Nasdaq 100 is slightly more correlated but still very low at 0.28. This lack of … Continued
Lookback is now live and open to everyone—you just need a tastytrade account. Perform Option Analysis, Backtest using historical data, expected trade simulation and projection using the Black-Scholes algo, plus advanced greeks and risk analysis. Go to https://lookback.tastytrade.com/ to signup. Watch tutorial videos here. Forecasted profit/loss graphic Unique to lookback, we include a historical … Continued
