Options

Why The Biotech Sector ETF (IBB) Is “Distributing” Pain

A few days ago I tweeted that the iShares Nasdaq Biotechnology ETF (IBB) looked to have entered a period of clear “distribution”, meaning that strength begets selling rather than the opposite. It is not shocking since in DeMark terms the Biotech Sector ETF is printing ominous “exhaustion” signals on daily, weekly, monthly and quarterly charts. But I’ll discuss the DeMark ‘tells’ later. First let me offer a few reasons why

The New Era Of Trading Stocks Off The Credit Markets

Good afternoon all. Today, rather than diving into the nitty gritty of the markets, I’d like to post an outline of why and how I tend to focus my attention and writings on the corporate bond market and related credit market derivatives. And how that affects my trading choices and strategies. First off, I want to make it clear that I am not a bond trader; I trade stocks and

Options and Volatility Outlook For March 10, 2015

Around this time last week, the Russell 2000 and the S&P 500 were near all time highs and looked like they might push even higher.  However, as I noted in “Volatility Might Be Flashing A Warning Sign For Stocks“, I had some concerns about the strength of the stock market as it made new highs. Even though volatility isn’t a predictor of price direction, it does exhibit some patterns that are

The State Of The TF: What’s Next For The Russell 2000?

While the state of the union may have been addressed in January, as we approach the end of the 1st quarter if trading in 2015, I want to take some time to craft a four part series reflecting on each of the major stock market indices. This isn’t necessarily to lay out a forecast for exactly what’s going to happen next. And since the major opportunity to go long presented itself weeks ago,

Why Options Traders Need To Be Mindful Of Skew

“Every month is a great month for an Iron Condor!” False. Options income traders frequently want to throw on the same trade every month. Sometimes they make slight adjustments for market conditions or volatility, but the reality is that it’s essential to understand the markets you are trading. And furthermore, the volatility characteristics of different markets can present additional complications that impact the performance of trades. And that’s why understanding

More Upside For The Russell 2000? Try A Bullish Butterfly

Small caps have finally broken out from their resistance level with the Russell 2000 (RUT) so far holding above the important 1220 level. Bullish momentum may carry the index another 2-3% higher, but that should be about it. The RUT has rallied from 1153 to 1232 for a gain of 6.85% in the last 16 trading days. For traders that think this rally might have another small leg higher, a

Is Volatility Flashing A Warning Sign For Stocks?

On Friday the S&P 500 closed at an all time high while the Volatility Index (VIX) went into the weekend just under 15. While a value of 15 isn’t incredibly low, it is on the lower end of the 3 month range. While everything looks great on the surface, other measures of volatility might be flashing a warning sign. However, before we head too far down the road of discussing

Higher VIX: How Concerned Should Investors Be?

VIX Moving Averages Are Pushing Higher In the weekly chart of the VIX “Fear Index” below, notice how the moving averages have been climbing higher since mid-2014. A logical question about a higher VIX is summed up in the tweet below: The recent rise in the VIX is relevant, but it should not be keeping us up at night, nor is it a reason (in isolation) to become bearish. The

Bullish On Apple? This Options Trade Could Net 43% In 16 Days

Apple’s stock (AAPL) is currently 8% below the high set in late November and bullish traders can set up a nice short-term AAPL options trade using a bull put spread. If a trader believed the recent low of $106 will hold, they could use the $106 strike as the short put and the $104 strike as the long put. Currently, this AAPL options trade offers a roughly 43% return on