Despite the fact that I continued to trade options I didn't made any blog post in a while and I felt responsible today... I will make a quick intro into my last trade.
The beginning of the year was one which involved allot of fear that the stocks are going to crash and in times like this the gold begins to feel to investors as safe heaven. In parallel Options implied volatility jumped higher.
At the time of this post the S&P 500 futures decreased just 1.75% after it was down more than 10% from the beginning of the year. By comparison, Gold this week was at one point up more than 20% from the start of the year.
The one month correlation between the 2 is negative .57%.
The Implied Volatility and Implied Volatility Rank presents a decent opportunity to sell the volatility as one can see just below:
Now if I take a look at the gold's ETF GLD, it's obvious that we have an inverse skew in the way the options are priced. So the calls are priced higher than the puts, considering the same distance from ATM(at-the-money). That implies the market sees the GLD has a bigger chance to continue higher. This is reflected as well in the probability of the options strikes to be in the money(ITM) which is higher on calls.
Based on supply/demand principles between sellers and buyers, the GLD after such a higher move should at least take a breath and let the investor regroup...
So, in conclusion I will look for the GLD to have maybe a small retracement but more inclined though in seeing a bit higher prices in the next 35 days. The confirmation of not seeing a strong move in the near future is confirmed by the lower kurtosis we see between the IV of the strikes.
Like in all the trades I look to induce in my portfolio a short/neutral delta, short vega and positive theta, which is a perfect hedging between the greeks.
The options trade strategy which fits all the above is a skewed Iron Condor where I sell the 35% of being ITM put which is inside of 1 SD and just 18% of being ITM call, outside of 1 SD and collect around third the width of the strikes and because of the skew I increase my POP (probability of profit) to 61%:
My preferred financial network is tastytrade, from where I pick up some of the data analysis.
The beginning of the year was one which involved allot of fear that the stocks are going to crash and in times like this the gold begins to feel to investors as safe heaven. In parallel Options implied volatility jumped higher.
At the time of this post the S&P 500 futures decreased just 1.75% after it was down more than 10% from the beginning of the year. By comparison, Gold this week was at one point up more than 20% from the start of the year.
The one month correlation between the 2 is negative .57%.
The Implied Volatility and Implied Volatility Rank presents a decent opportunity to sell the volatility as one can see just below:
 |
| Trading opportunities considering Implied Volatility |
 |
| Implied Volatility Chart |
Now if I take a look at the gold's ETF GLD, it's obvious that we have an inverse skew in the way the options are priced. So the calls are priced higher than the puts, considering the same distance from ATM(at-the-money). That implies the market sees the GLD has a bigger chance to continue higher. This is reflected as well in the probability of the options strikes to be in the money(ITM) which is higher on calls.
 |
| Options strikes table view |
Based on supply/demand principles between sellers and buyers, the GLD after such a higher move should at least take a breath and let the investor regroup...
So, in conclusion I will look for the GLD to have maybe a small retracement but more inclined though in seeing a bit higher prices in the next 35 days. The confirmation of not seeing a strong move in the near future is confirmed by the lower kurtosis we see between the IV of the strikes.
Like in all the trades I look to induce in my portfolio a short/neutral delta, short vega and positive theta, which is a perfect hedging between the greeks.
The options trade strategy which fits all the above is a skewed Iron Condor where I sell the 35% of being ITM put which is inside of 1 SD and just 18% of being ITM call, outside of 1 SD and collect around third the width of the strikes and because of the skew I increase my POP (probability of profit) to 61%:
 |
| View of Options strategy risk/reward |
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