The Option Workshop

Straddles

Jason Alexander — Wed, 01 Feb 2012 20:27:41 +0000

With the implied volatility of the S&P 500 Index (as represented by the VIX) touching 18 and the 20 day Realized Volatility down at around 8%, I’ve been hearing quite a bit from students and colleagues about long gamma positions – straddles in...

Option strategies from the workshop. Visit www.optionworkshop.com for the complete article.

Credit Spread Adjustments: Delta Hedging with Stock

Jason Alexander — Mon, 19 Dec 2011 16:34:28 +0000

One of the most effective ways to adjust a broken out-of-the-money vertical spread is with stock. So many of us in the retail world—having been introduced to the flexibility and/ or leverage of options—seem hotly opposed to taking a position in an...

Option strategies from the workshop. Visit www.optionworkshop.com for the complete article.

Friday’s 13.8% VIX Slammer!

Jason Alexander — Mon, 12 Dec 2011 05:07:45 +0000

I’ve noticed a prevalence of commentary over the weekend by pundits, bloggers, tweeters and the like talking about how Friday’s near 14% drop in the VIX was a strong indicator that S&P 500 Index is positioned for a magnificent Santa Claus rally...

Option strategies from the workshop. Visit www.optionworkshop.com for the complete article.

Quick Thoughts on Credit Spreads in Today’s Market

Jason Alexander — Thu, 01 Dec 2011 17:42:28 +0000

The 2+ standard deviation move yesterday and the looming Fibonacci resistance at the 1257 signify to me that price will probably relax for the next couple of days and perhaps pull back some. The fact is that even with yesterday’s liquidity...

Option strategies from the workshop. Visit www.optionworkshop.com for the complete article.

A Backspread for High and Low Volatility Environments

Jason Alexander — Wed, 23 Nov 2011 19:40:58 +0000

The Ratio Backspread is a hell of a trade. When positioned at different points along the option chain, the same trade can have completely opposite price and volatility outlooks. As an introduction to the spread, I’d like to illustrate two of the...

Option strategies from the workshop. Visit www.optionworkshop.com for the complete article.

How to Defend a Credit Spread with Vertical Skew

Jason Alexander — Tue, 15 Nov 2011 18:35:45 +0000

Analysis of the volatility skew is a subject that has perhaps been beaten to death. Yet it is still too often ignored by the typical credit spread trader. I write this with some trepidation of sounding like a broken record. The truth is that...

Option strategies from the workshop. Visit www.optionworkshop.com for the complete article.

VIX and the Square Root of Time

Jason Alexander — Mon, 07 Nov 2011 23:03:20 +0000

The media loves to quote the VIX as a market barometer and everyone else in turn loves to point out how wrong the media usually is in their loose translations of the VIX. But what is surprising is how few option traders completely understand what...

Option strategies from the workshop. Visit www.optionworkshop.com for the complete article.

A Case for VIX Call Spreads

Jason Alexander — Wed, 02 Nov 2011 16:27:04 +0000

I’m not usually one for publishing macro economic thoughts. But with that said, here’s a quick thought for traders with some experience in trading volatility assets: the domestic economic news that has been coming out over the last few...

Option strategies from the workshop. Visit www.optionworkshop.com for the complete article.

The Earnings Ratio Condor

Jason Alexander — Mon, 31 Oct 2011 15:28:13 +0000

Just as it is common for at-the-money implied volatility to rise leading up into an earnings announcement (as discussed in The Earnings Straddle in Different Flavors), it is also common for the curvature of the volatility skew to become more...

Option strategies from the workshop. Visit www.optionworkshop.com for the complete article.

The Earnings Straddle in Different Flavors

Jason Alexander — Mon, 24 Oct 2011 18:52:41 +0000

A common phenomenon during earnings season is for implied volatility (IV) to rise in anticipation of the event. The most common strategy to capitalize on this is the purchase of an ATM call and put: the long Straddle. The Earnings Straddle...

Option strategies from the workshop. Visit www.optionworkshop.com for the complete article.