Short Volatility and the Short Delta Bias

The S&P 500 is now roughly twice as high as it was before the correction observed during the Great Recession.  In the spring of 2007, the S&P 500 briefly flirted with levels above 1,500. As of November 2019, the S&P 500 is well above 3,000. Talk about a bull run. This is now the longest … Continued

Yield Curve Opportunities Amid Trade War Optimism

Optimism related to the proposed “Phase 1” trade deal between the United States and China appears to be spreading like wildfire across a wide range of asset classes. It’s been reported in recent weeks that negotiators from the U.S. and China ultimately decided to try to work in smaller increments toward finalizing a broader trade … Continued

The Magic of 45: Optimal Short Options Trade Duration

Experienced traders understand there’s no magic crystal ball when it comes to accurately predicting the financial markets. That’s why smart traders focus on approaches that have historically demonstrated a high win percentage, such as mean reversion and the short premium philosophy.  After all, a higher probability of winning at trade deployment reduces trader dependence on … Continued

Trading the Post-Earnings Volatility Crush

Corporate earnings season is usually a treat for options traders. Opportunities multiply as implied volatility swirls in different directions across a wide swath of symbols.  And while most traders have already identified how they like to approach an “earnings play,” the post-earnings playbook can be less robust. Post-earnings depression for volatility traders can be a … Continued

Don’t Fear Volatility: Reap It!

Modern Halloween traditions are steeped in “fear,” which unofficially makes the holiday a celebration of volatility.  That’s because most traditional financial media outlets usually talk about the appearance of volatility in the financial markets as if they were reporting a recent sighting of Halloween’s Michael Myers in Haddonfield. “Oh no, the market is moving—it’s time … Continued

Short Volatility

One of the paramount goals when trading the financial markets is to maximize potential gains. Secondarily, most traders would likely prefer to minimize risk. If you are trading short premium, there are a couple simple guidelines to follow which can arguably help with both.  These include the application of a trade management system; in tandem … Continued

Oil Spreads

Trading the financial markets is like any business endeavor—there are nuances to the game which vary across different geographical regions of the globe. For example, equity options aren’t yet widely available in the mainland Chinese financial market. As of now, equity options are basically only traded on one product in China: the China 50 ETF.  … Continued

Mastering the Vertical Spread

Many options traders have a good idea of the specific trading approach they might choose to employ when identifying an opportunity in the marketplace, especially if it capitalizes upon an extreme level of volatility or price. For example, a short straddle or short strangle tends to be a popular choice when volatility is high, while … Continued

Seasonal Opportunities in the Natural Gas You Can Trade

While the heavyweight in global energy markets remains crude oil, natural gas is no slouch. On any given day, trading volumes in natural gas futures are typically the second highest within the energy sector. Even when considering the entirety of the futures-trading marketplace, total daily volume in natural gas usually places it in the top … Continued

Probabilities Don’t Lie

“Occurrences” when trading volatility typically refers to the total number of trades deployed over a given period of time (one year, for example). Because volatility trading relies so heavily on mathematical probabilities, it stands to reason that the likelihood of reaching those probabilities increases along with the number of occurrences. For example, if you flip … Continued