In 2017, a mysterious trader appeared in the VIX options market betting millions on a huge spike in market volatility, and as of February 2023 it appears that trader is back
Skew exists in the options market due to the fear of a market correction, which means put prices are naturally higher than call prices
Back in early 2020, options trading volumes surged amidst record volatility in the stock market—and interest in the options market has remained strong ever since, with the 2022 trading year setting a new record for the most options contracts traded in a single year.
The Put/Call Ratio provides important insight into market sentiment. Here’s how to make the most of it.
Puts are traditionally more expensive than calls in the options marketplace due to the existence of “skew.”
When ratio spreads move into a winning position they can be converted into so-called “free” butterfly spreads. When taking a position in the market, most investors and traders seek to minimize potential risks, while maximizing potential rewards. In certain cases, this may even materialize in the form of “pure arbitrage”—a situation in which a position … Continued
The overarching pricing relationship that exists between calls, puts, the underlying and the strike price. Options trading has exploded during the last 12 months, and for good reason. Options add flexibility to a portfolio, whether it be for the purpose of hedging, speculating or managing risk. However, it’s important to recognize that options differ from … Continued
Covered calls are one of the most popular options-based strategies in the stock market because they provide equity holders with valuable flexibility when it comes to managing positional risks and rewards. Although trading options may not fit every investor’s risk profile, the covered call is a straightforward and effective strategy that many market participants utilize … Continued
Many investors and traders are comfortable trading equities (i.e. stocks), but fewer are familiar with equity options. Knowledge and awareness of this niche of the financial markets can serve as a robust supplement to the stock market—as a source of additional market insight, or as an avenue toward expanding one’s strategic investing/trading approach. In terms … Continued
The 2020 trading year has been unusual, and it’s arguably getting weirder. For most, the weirdness of 2020 has been illustrated through stock market indexes making all-time highs, set against the backdrop of a besieged economy plagued by record levels of unemployment. But bullish trends in U.S. stock indexes (S&P 500, Nasdaq 100, Russell 2000) … Continued