Jill Malandrino of Options Profits and T3Live's Chief Strategist, Scott Redler, review multiple markets we trade and what to look for in the coming week. Mark Sebastian of Option Pit gives you the options play with a bearish bias.
In yesterday's Big Idea , I pointed out that on Friday, September 30, while the CBOE Volatility Index ( VIX) went up, the volatility of VIX options went down. Yesterday, again while SPX was up, in an even more clear sign that the market is both fully hedged and/or hitting a volatility fatigue, SPX options actually saw the implied volatility of their options fall too. This may not be a great sign that implied volatility is going to go down, however I think it is a decent sign that implied volatility may stop going up. This makes sense considering the market would need to move 2.8% a day to justify the current VIX.
Let's take a look at the T3/OP video with Jill and Scott as they review recent market action and new levels to keep an eye on.
On a more long-term scale the SPX would need to move 500 points (almost 5000 dow points) a year to pay for the current VIX. Bascially, bearish or bullish, it is very difficult to justify owning a lot of options premium right now. Bullish traders should consider selling put spreads or buying call spreads or butterflies. Bearish traders (such as myself) should sell calls and call spreads. That is what I would like to do.
With the SPX having taken a new dive, I think support levels line up around 1175, which is where I would be looking to sell in SPX. In the SPDR S&P 500 ETF ( SPY), that means the 117 calls. With IV this high, we can afford to sell a very-close-to-expiration options.
Trades: With SPY trading $109.93, sell to open October 117 calls at $1.15 and buy to open October 118 calls for $0.91.
Net sell SPY 117/118 call spread at $0.24.
On Wednesday, October 19 at 6:00 p.m. EDT, TheStreet's Options Profits is hosting a webinar featuring Fred Ruffy of WhatsTrading.com. Join Fred as he outlines how to look at the "big picture", drill down into the sectors and ultimately find the individual options trade. Utilizing specific trade examples and case studies, Fred will show you how to select simple and advanced options plays. The back half of the webinar will include an interactive, exciting Q&A session.
Please email: email@example.com to secure a slot for the webinar as space is limited and for the link to the presentation. There is NO NEED to resend an RSVP, I have secured a slot for you.