How to Trade the Surge in Market Volatility
Investors and traders looking to exploit the surge in market volatility might consider the options market, with a strategic emphasis on mean reversion.
How to Trade the Surge in Market Volatility
Why Rho Matters When Interest Rates are Moving
Rho measures the sensitivity of an option’s value to changes in interest rates and is in the spotlight because of the Federal Reserve’s aggressive plan to raise rates.
Tips and Tactics to Fight Time Decay
Short options traders rely on the power of time decay to produce profits, but the addition of trade management techniques can help maximize profits, while simultaneously helping to reduce expiration-related risks.
Trading the New Low Volatility Environment
Due to dissipating volatility in the financial markets, investors and traders may need to adjust their playbooks for the remainder of 2021—as evidenced by the recent drop in the CBOE Volatility Index (VIX).
The Short Volatility Playbook
The mean-reverting nature of volatility makes it a great candidate for a portfolio, especially compared to directional bets, which typically constitute a 50-50 proposition. Hindsight illustrates that since the market bottomed in March 2020, picking market direction has been a lot easier than usual. Based on the performance of broad-market indexes, such as the Nasdaq … Continued
Is it Time to Buy Options? Volatility Tells
While some traders use options to make directional bets via so-called “naked options,” many use derivatives to express opinions on implied volatility. Implied volatility has historically exhibited a tendency to mean revert, meaning high levels of implied volatility tend to decline back toward the historical mean, and low levels of implied volatility tend to rise … Continued
Naked Options: High Octane Directional Plays
In 1931 it took the U.S. stock market 15 days to go from highs to bear market territory—the latter term defined as a decline of at least 20%. In February and March of 2020, that same plunge took 19 days, meaning this has been the second-fastest pace in the history of trading to a bear … Continued
Time Decay, Theta & Toga Parties
Let’s talk Greeks—and no, there will be no reference to toga parties (sorry about the clickbait). Instead, the “Greek” we’ll cover is theta, aka time decay. Theta describes the declining value of an option as time passes, a critical component for anyone trading options. Specifically, theta reports how much an option theoretically decreases in value … Continued