SPDR S&P 500 ETF Options Going Into Unemployment Report

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There is a mismatch in the SPDR S&P 500 ETF (SPY) option implied volatility skew right now. This is going into the U.S. unemployment report coming up this Friday. The out of the money calls, expiring this Friday March 4th, are trading at a tremendous discount to the out of the money puts. This is telling me that the market is expecting a bearish report.

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Market Volatility Presenting Potential Opportunity in Gold Trust Options

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The recent rise in gold and market volatility has caused an increase in implied volatility in SPDR Gold Trust options.

The implied volatility for  the 115 call options expiring this Friday, February 16th is 26.2%. Call options expiring in three weeks, March 4th have an implied volatility of 22.8%. The SPDR Gold Trust Fund closed at 114.77 today.

Quotes

I am looking to sell the February 19th calls and buy the March 4th calls. Ideally Gold is below 115 on Friday. In this case, the February 19th calls will expire worthless and I can close out my March 4th calls. The larger time decay in the near term calls, will result in a profit.

Either way, if volatility stays low, the trade should be profitable. The risk is that implied volatility rises even more. This is illustrated by the higher vega for the March 4th calls. The February 19th calls have a larger negative theta, which indicates a larger time decay.

OptStats

I think the rewards outweigh the risks for this trade. Gold options implied volatility is due to stabilize or trend down a little from here. If not I’ll close out my position and take the loss.

Buy Write Option Strategy

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Buy Write Strategy

Buy Write Strategy

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Buy/Write Strategy Is It Something To Consider

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A buy/write options strategy is a tried and true method to capitalize on market gains, while  boosting income. In this article, I will explain what a buy/write strategy is, when it works best and if it is worth executing.


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The Chinese Stock Market. What The Options Market Is Telling Us

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The Chinese stock market has been on a wild ride this year. It nearly doubled the first half. Then tanked in mid June. Since it’s peak, it has lost about 50% of it’s value. Is it going to keep going down? The other day, Goldman Sachs said this is the time to buy. Is it? It’s really hard to buy, when the market is down that much. Never try and catch a falling knife as they say.


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Enhancements To Option Strategies Analytical Tools

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Option Strategies is always working to give our users access to the best free option analysis tools.  So you can find the best option strategy. We just recently enhanced our strategy analyzer by adding two new features. I will go over the new features in this post.

First, I will explain how to get to the tool. Begin by typing in a symbol or the name of a stock or ETF in the “Analyze Option Strategies” box, on the home page of Option Strategies. You will then get a dropdown, with a list, that will match what you typed in. Select the stock or ETF you wish to analyze from here. You can see an example below.

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Using Options For Income–The Basics

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One of the ways you can use options is to boost income.  As with all option strategies, there are tradeoffs between risk and reward. However, done right, the potential downsides can be turned into a positive. The upside can be a steady stream of income.

The two easiest way to use options for income is selling either puts or calls.  The idea is that you sell a slightly out of the money option, that will expire worthless. You then get to keep the premium you received from the sale of the option. There are intricacies with using either puts or calls.

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