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VIX option 2010 April expiration — settlement value 15.94

Wednesday, April 21st, 2010

The settlement value for the VIX index options for April was 15.94 This settlement value is quoted under the symbol VRO (^VRO for Yahoo, $VRO for Schwab). Today’s 21-April opening value for the VIX index was 15.80, so the difference was a relatively small 0.14 (.9%). The settlement value and the real time VIX index quotes are computed different ways, so there is usually a small difference.

Posted in Advanced Topics, VIX, all | View Comments

Free option charts

Wednesday, March 24th, 2010

One of my ongoing frustrations has been the lack of options charting capabilities on Schwab and Fidelity trading platforms.  Perhaps that capability is there, but it is certainly not easy to find, or charts become unavailable as soon as an option expires.    Recently I discovered that  BigCharts http://bigcharts.marketwatch.com/ offers free options charts and they are pretty good!

BigCharts uses  the new standard option symbols, not the Fidelity or Schwab flavors.  If you hold your mouse over their “quote” word in their options chains it will show the correct symbol.   The standard option symbol format is:  <ticker><YYMMDD><C or P> <5 digit strike price> <3 decimal strike fraction>.       So SPY 116 April calls would be:  ”SPY100417C00117000″ –obvious, right?    It wouldn’t be so bad if everyone used the same format, but my head spins looking at the at least three flavors I am aware off.

The ticker symbol still varies depending on strike price ranges for most options, but over the next few months they will all be rationalized to use the standard ticker where possible.

BigCharts avoids the huge issue of charts not being available after the options expire.  But it looks like it still suffers from the problem that intra-day information becomes unavailable soon after the options expire.  They need to allow a range of dates to be displayed, not just assume that you want everything referenced back in time from today’s date.

The other thing they need to do is to chart bid/ask values if actual trade values are not  available.   Since many options are lightly traded their charts are deserts of information.  Bid / ask history would be much better than nothing.

Posted in Advanced Topics, Covered Calls, Options, VIX, all | View Comments

Trading range, break-out, or double dip–some patience required

Monday, March 8th, 2010

I have been not so patiently waiting for the market to pick a direction.   I have been surprised at the strength of the rebound from the lows a month ago–we are less than a point away from SPY setting 15 month highs.   My gut is still telling me we are in a trading range similar to 2004 and 1999 after big bull run-ups, but I’m not willing to put a lot of chips down to back that up.    I’m still about 80% in cash, with my bearish SDS play somewhat in the red.   Oil looks high, and I’m not anxious to try and capture the upcoming March SPY dividend because of what feels like downside risk.

Over the last year I have not tried to strongly play the downside moves, but I wondering if I should be, for example going long on VIX options, or shorting SPY in some fashion.    The upside odds look quite a bit lower than the downside odds right now.

SPY 150 day chart, click to enlarge

SPY 150 day chart, click to enlarge

Off the trendline, but what’s next?

SPY 150 months, click to enlarge

SPY 150 months, click to enlarge

Posted in Advanced Topics, Dividend Capture, Mainstream, Options, VIX, dividend, ex-dividend | View Comments

Investing ideas for March: Oil, SPY, Dividend capture, VIX

Tuesday, February 23rd, 2010

Looking forward to some possibilities in March:

  1. Oil (EFT USO) — I’m bearish right now at 38.  I will probably jump back in with covered calls if it drops to the 36 range.
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  2. SPY —  I’m bearish now.   Will probably jump back in with covered calls if  SPY drops to around 106.
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  3. Monday March 1  –  Ex-dividend date for most ETFs with monthly distributions (e.g., AGG, IEF, JNK, TIP).   I’m still looking for a good dividend capture play here.    Most of these funds have thinly traded options and low volatilities, so option based dividend capture schemes I’ve priced are not attractive. Best strategy I’ve seen is buying the ETF the morning before ex-dividend and selling at close that day–but this is obviously exposed to market action.   JNK could probably be hedged by going short on SPY (or long SH, SDS) , but probably not a good enough correlation to make me comfortable.  Purchases have to be made by Friday February 26th to qualify for the dividend.
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  4. Wednesday March 17th — VIX option expiration.    Currently the VIX index is running in the low twenties.    I don’t have any feel for direction right now–staying on the sidelines, awaiting inspiration.
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  5. Friday March 19th — Ex-dividend date for DIA.   My February dividend capture approach worked well–will have to see how the market is behaving 4 or 5 days before.   My dividend history chart suggests the payout will be around $0.24.
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  6. Friday March 19th — SPY ex-dividend (estimated payout of $0.52) date–also ex-dividend date for many  SPDRs funds with quarterly distributions.  Schwab’s new no commission ETFs will probably go ex-dividend on the 19th also.   I will probably use the same dividend capture /  early option exercise approach I used on DIA (sell ITM calls 4 or 5 days before the ex-dividend with extrinsic values about equal to the the dividend payout).  It works very well in a flat or uptrending market.  I typically use both the monthy SPY options and the quarterly SPY options, which expire 31-March (symbol RDQ).    The dividend payout gives an additional ~$0.5 margin on break-even if the market goes against you.
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  7. Saturday March 20th — Equity options expire
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  8. Thursday March 25th  – IVV ex-dividend (estimated payout of  $0.50) date–also ex-dividend date for many iShare funds with quarterly distributions.    IVV’s options historically have not been attractive for my ITM option dividend capture approach, so I usually sit out this one.  Still looking for a good candidate however.
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  9. Thursday April 1st  – SPY March quarterly options expire

Posted in Advanced Topics, Covered Calls, Dividend Capture, Mainstream, Options, VIX, all, dividend, ex-dividend | View Comments

February VIX options expire — fear takes a bite

Wednesday, February 17th, 2010

February VIX options expired today.   The settlement price (ticker VRO/$VRO/^VRO) was 22.50.  The VIX index opened at 22.25.   With this settlement price I ended up losing .35 per call on my VIX spread.    Things could have been much worse–I could have lost up to 2.85 with the spread.    I certainly didn’t expect the VIX to stay up at the levels it has.     People always seem surprised at how fast things drop in a correction, that coupled with the recent savage bear market,  and the uncertainty in the EU, has people spooked.   The 6 month pattern of VIX dropping rapidly after upticks was broken with this sequence.  I’m reminded of the quote, “everything works sometimes but nothing works all the time”.

6 Months VIX index, Click to enlarge

6 Months VIX index, Click to enlarge

Posted in Advanced Topics, VIX, all | View Comments

Betting that fear will fade

Monday, January 25th, 2010

I created a bear spread on VIX options, selling the deep-in-the-money  18 Feb Calls and buying 25 Feb Calls as disaster insurance.   The net credit was 4.15.  Splitting the ask / bid on both options gave a 4.20 starting point, but  when it didn’t fill I gave up a nickel–then the order filled in a couple of minutes.   The 18 calls filled at 6.22 and the 25 calls at 2.04.  Break-even at expiration will be VIX at 22, which didn’t seem like too much of a risk.  I estimated  (based on the 10 Feb call bid / ask numbers), that the VIX Feb futures were right around 24 at the time, and the VIX was up into the 25 range.

Posted in Advanced Topics, Options, VIX, all | View Comments

What’s up for Monday?

Sunday, January 24th, 2010

I expect the US markets to open lower tomorrow, with the S&P 500 dropping 0.5% to 1.0% fairly quickly.  There are a lot of people still understandably nervous about the stock market after the last two years, and I suspect the speed of this correction has surprised them.   People forget that any real drop-off in the market tends to happen at 2X the speed of the climb.    After missing most of the action last week and worrying about the market over the weekend many people will just want out.

I didn’t see any news that warrants a different view of the economic environment.   Google and Intel reported good numbers, and overall the financial section reports didn’t justify a rush to the sidelines.  Of course, if congress really does what Obama is asking, and restructure the worst offenders of the “too big to fail, but now giving outrageous bonuses bunch” , they will get hurt, but this is hardly going to be a quick thing.  Congress can’t even move quickly with a (former) super majority in the Senate.

In my opinion this was just a long overdue correction.  After a early sell-off Monday, I expect things to stabilize, and recover to close around even for the day.   The market rarely does strong “V” type recoveries, so I doubt the market will start making significant positive progress for a couple of days–of course if we go into a bear phase, things will be much different.    If things do stabilize I expect that the market will recover at least half of the general losses by the end of the week.

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Posted in Advanced Topics, Covered Calls, Mainstream, Options, VIX, all | View Comments

VIX option expiration dates 2010

Friday, January 22nd, 2010

Upcoming Expiration dates for VIX, RVX options are:

February 17th, 2010
March 17th, 2010
April 21st, 2010
May 19th, 2010
June 16th, 2010
July 21st, 2010
August 18th, 2010 (VIX open 24.30  VRO settlement 24.82)
September 15th, 2010 — Next
October 20th, 2010
November 17th, 2010
December 22nd, 2010

The last day of trading for the options expiring that month is the day before (Tuesday) the dates above.

The exercise / settlement values are not the opening values of the VIX / RVX index, but rather their special opening quote values.    These quotes have their own symbol and are printed a few minutes after opening.  The VIX settlement value is VRO  (Yahoo ^VRO, Schwab $VRO), and RSL for the Russell Volatility index.

Source:    2010 OCC Calendar

Posted in Advanced Topics, Options, VIX, all | View Comments

VXX trades over 7 million shares–am I missing something?

Wednesday, January 20th, 2010

Bill, from “VIX and More”, recently posted how the volume on VXX has recently jumped up  to over 4 million shares a day.   Today VXX traded almost 7.5 millions shares, which I suspect is a record or near record.   Good volume in a investment product tends to improve its attractiveness.  VXX’s bid / ask spreads for example used to be 0.10 or more, now they  have closed to a few cents. Schwab has dropped its “Hard to Borrow” notation, so selling VXX short is an open possibility (which I understand has been the case with other brokers for quite a while).

I have posted previously on the problems with the VXX.  Structurally it can’t track the VIX well, and it significantly under-performs in the long term compared to similar investments, like VIX call options.    But obviously people are flocking too it–perhaps because it is one of the few ways to simply profit on a market downturn (although SDS comes to mind).   If their timing is good, and they only stay in for a few days, they could walk away happy, but I think most buyers will be disappointed.

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Posted in Advanced Topics, Options, VIX, all | View Comments

Projections for 2010

Sunday, January 3rd, 2010

As much as I wish there was a system that we could turn the crank and make lots of money on the markets, I think the market is too good for that to work.  We are reduced to educated guesswork.  Some guesses:

  • The S&P 500 will move from its astonishing trendline to a slightly down trending sideways market for 6 months before it starts moving up in a sustained fashion.  I project the SPY low will be at around 100, 10% off recent highs. The chart below indicates we have already moved off of the trendline. This guess is based on what happened in somewhat similar situations in 1999 and 2004 (big uptrends after significant bottoms).  Click on graph to enlarge.

12 year look at SPY

  • The VIX index will continue its downward trend, but the rate of decay will slow.   Lows around 16 by the end of 2010.

  • Interest rates  will increase.   This prediction seems like a no-brainer, but as usual the timing is the trick.    It seems that there is very little risk that interest rates will go down this year.  We should be able to make money on that.

  • The price of oil will continue to go up.   Reviving economies will consume more oil, and the oil producers will be happy to let that happen. But don’t expect another bubble–it takes people longer than a year to forget the bubble collapse in any given asset.

  • Manufacturing will continue to lead us out of this recession.  Real estate, especially high end residential and commercial will not get healthy this year.   Job-less recovery and real-estate hang-over will keep consumers from helping much until the 2nd half of the year.

Posted in Mainstream, VIX, all | View Comments

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