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Options

Cboe - SPX Rebounds on Strong GDP


Dan Deming discusses volatility and other trading activity.

 

Originally Posted on April 26, 2019

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies are available from your broker, or at www.theocc.com. The information in this program is provided solely for general education and information purposes. No statement within the program should be construed as a recommendation to buy or sell a security or to provide investment advice. The opinions expressed in this program are solely the opinions of the participants, and do not necessarily reflect the opinions of Cboe or any of its subsidiaries or affiliates. You agree that under no circumstances will Cboe or its affiliates, or their respective directors, officers, trading permit holders, employees, and agents, be liable for any loss or damage caused by your reliance on information obtained from the program.

Copyright © 2019 Chicago Board Options Exchange, Incorporated.   All rights reserved.

Options involve risk and are not suitable for all investors. For more information read the “Characteristics and Risks of Standardized Options”. For a copy call Interactive Brokers’ Client Services on 312-542-6901.

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Cboe and is being posted with Cboe’s permission. The views expressed in this material are solely those of the author and/or Cboe and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Options

CME - Striking Options: Earnings Season Starts and Crude Oil Rallies


Hosts: Jeff Kilburg, KKM Financial and Scott Bauer, Prosper Trading Academy

 

Originally Posted on January 8, 2019

Options and Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading options read the “Characteristics and Risks of Standardized Options”. Before trading futures, please read the CFTC Risk Disclosure. Copies of these disclosures are available at ibkr.com

Never miss out on daily futures and options trading opportunities - Click here to Subscribe to In FOCUS Newsletter for Active Traders.

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from CME Group and is being posted with CME Group’s permission. The views expressed in this material are solely those of the author and/or CME Group and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Options

Barron's - When Stock Market Volatility Means Opportunity - By Steven M. Sears


It’s the start of a new year, and it’s hard to know what to expect aside from sharp volatility. This is a dramatic divergence from a year ago. when it could be said with confidence that volatility was perhaps the world’s most attractively priced asset. The S&P 500’s realized volatility was far below its long-term average of 16%, a level that has existed since 1929.

Since then, volatility has normalized and then some, and what happens next is truly anybody’s guess.

Rather than lamenting this turn of events, we find ourselves increasingly thinking of something President John F. Kennedy’s said long ago, quoting Phillips Brooks: Do not pray for easy lives. Pray to be stronger men. That advice—which we update to include women—is helpful because volatility, which historically frightens most people, most of the time, into making bad decisions, increasingly defines markets, politics, monetary policy, global trade, international relations, and so many other areas of life and commerce.

Just as many investors “greed in” at market tops, they usually “panic out” when confronted by volatility. If there is one great lesson of the past decade, it is this: Uncertainty, and especially widespread fear, create opportunities for anyone with the time and resources to confront change. Hence, we offer some principles to provide some ballast to the tumult that should define 2019’s market.

Embrace volatility. The S&P 500’s realized volatility was 17% for 2018, up from 6.8% for the previous year, which was the lowest level since about 1965. Rather than fearing volatility, weaponize implied and realized volatility. Read Sheldon Natenberg’s Option Volatility & Pricing, and you will have an edge over other investors.

Remember this little ditty: When VIX is high, it’s time to buy. When VIX is low, it’s time to go. Extreme fear often creates attractive opportunities. Volatile volatility is back, but not yet at an extreme level. Consider upside VIX call options—a bet on continued chaos.

Define risk. Too many people have insane ideas about how much money they will make in the markets. Remember Bitcoin? All successful investors, regardless of how they invest, have this in common: They never lose big. They quickly control losses. You can hedge with options. You can use limit orders to automatically sell stocks should prices drop 10%.

Bottom line: Do something, because the Federal Reserve is normalizing interest rates, inflation is rising, macro risks remain elevated, and the investing environment is challenging for the first time in a decade. Upside calls are good stock surrogates. Selling downside put options positions investors to buy stocks at lower lows.

Know thyself. Write down your investment objectives. Keep the list as an antidote to the investment pornography that distracts many from realizing their goals. If your plan is too complicated, simplify.

Look to the past to understand the present and future. Review your previous year’s investment performance. Did you outperform the market or lag behind benchmark indexes? Do you know why? Were you lucky or smart? If you do not understand what happened with your account last year, especially during the final few months, you will struggle, as the market seems poised to be unforgiving this year.

Avoid margin. Leverage works when market trends are clear. Now it seems the market is turning. Interactive Brokers, an online brokerage that caters to sophisticated investors, recently reported a drop in margin rates, which is a sign that the smart money is shunning debt. Resist the urge to take heroic market stands, especially with borrowed money.

The goal, as is true from one year to the next, is to always remain in the game, to always be investing and trading, and to never take on so much risk that you are knocked out of the markets. 

--

Steven M. Sears is the chief investment officer of StratiFi Technologies.

Get investing analysis that moves stocks and markets—Subscribe to Barron’s

Options involve risk and are not suitable for all investors. For more information read the “Characteristics and Risks of Standardized Options”.

 

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Barron's and is being posted with Barron’s permission. The views expressed in this material are solely those of the author and/or Barron's and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Options

Cboe - Vol 411: Volatile Market Continues in the New Year


Host Michael Palmer discusses VIX activity and market moves to start the new year.

 

Originally Posted on January 3, 2018

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies are available from your broker, or at www.theocc.com. The information in this program is provided solely for general education and information purposes. No statement within the program should be construed as a recommendation to buy or sell a security or to provide investment advice. The opinions expressed in this program are solely the opinions of the participants, and do not necessarily reflect the opinions of Cboe or any of its subsidiaries or affiliates. You agree that under no circumstances will Cboe or its affiliates, or their respective directors, officers, trading permit holders, employees, and agents, be liable for any loss or damage caused by your reliance on information obtained from the program.

Copyright © 2018 Chicago Board Options Exchange, Incorporated.   All rights reserved.

Options involve risk and are not suitable for all investors. For more information read the “Characteristics and Risks of Standardized Options”

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Cboe and is being posted with Cboe’s permission. The views expressed in this material are solely those of the author and/or Cboe and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Options

Barron's - It's Time to Bet on Apple Now - Here's How - By Steven M. Sears


The end of days seems nigh.

The stock market’s trading patterns are alarmingly erratic. Options volatility has reached levels not seen in years. Yet the Cboe Volatility Index, or VIX, may even be understating the market’s troubles, which seem to be snowballing toward a dramatic conclusion.

While many investors are fretting about myriad risks, including a recession, rising rates, inflation, China’s economic woes, Brexit, peak corporate earnings, and President Donald Trump’s legal and political tribulations, some are playing a longer game.

These investors, who have the financial resources and experience to look beyond the daily tumult, are buying select stocks when the market is down sharply. They are embracing the fear of other investors—man or machine. Some say the real money is made in bear markets, a lesson learned during the financial crisis. Investors who bought when others would not or could not were rewarded when financial conditions stabilized and markets advanced.

In late February, we asserted here that fear was perhaps the only friend investors had on Wall Street. This was after noting in late 2017 that volatility, then at a 50-year low, was perhaps the world’s most attractively priced asset.

Volatility is now sharply elevated, and cash-secured put options offer investors a way to monetize fear by creating or enhancing positions in blue-chip equities they could maintain for at least three to five years—a market cycle. (A put option gives investors the right to sell a stock at a certain price and time.) Could stocks still go down after doing this? Yes, so conviction, cunning, and longevity are key.

Everyone has a list of companies with compelling themes—and, ideally, reliable and competitively attractive dividends—and such stocks are worth considering even as market risks remain.

Consider Apple (ticker: AAPL). The stock is off about 5% this year. The Street cheered as Apple became the first trillion-dollar company, but it now worries iPhone sales have peaked, and the stock has been pummeled.

This seems to be a parlor game. The Street bullishly promotes Apple for a few quarters or years, and bearishly frets if a new product fails to redefine the technological experience. Then investors take profits and knock the stock around until a sign emerges to show the company is fine. If you agree with this view, it’s possible to get paid to buy the stock below its 52-week low.

With the stock around $157, investors could sell Apple’s July $150 put for about $12.10. The risk: The stock sinks below $150, forcing investors to cover the put at a higher price or to buy the stock at $150. If Apple is above $150 at expiration, investors keep the put premium. During the past year, Apple shares have ranged from $150.24 to $233.47.

“Fear and time are often an investor’s great allies,” says Michael Schwartz, Oppenheimer’s chief options strategist.

Other stocks worthy of consideration include Bank of America (BAC) and BlackRock (BLK) . The former is a cheap way to play rising rates, while the latter is the financial world’s analytical and exchange-traded-fund majordomo. The stocks are down this year, but their long-term prospects are bright. Both made Barron’s 2019 top investments list.

Still, risks remain. Anything bought today may decline tomorrow, as market risks are elevated. So, incrementally build or enhance positions to try to create the best possible pricing.

Indeed, Thomas Peterffy, Interactive Brokers’ founder and chairman, says uncertainty about the world’s future socioeconomic landscape is at recent highs. “We are marching into chaos,” he warns.

If you are afraid, reasonable risk-free returns exist in three-month bonds or money-market funds. But if you can embrace fear and time, then today’s challenges can be tomorrow’s victories. 

--

Steven M. Sears is the chief investment officer of StratiFi Technologies.

Get investing analysis that moves stocks and markets—Subscribe to Barron’s

Options involve risk and are not suitable for all investors. For more information read the “Characteristics and Risks of Standardized Options”.

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Barron's and is being posted with Barron’s permission. The views expressed in this material are solely those of the author and/or Barron's and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Disclosures

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The material (including articles and commentary) provided on IB Traders' Insight is offered for informational purposes only. The posted material is NOT a recommendation by Interactive Brokers (IB) that you or your clients should contract for the services of or invest with any of the independent advisors or hedge funds or others who may post on IB Traders' Insight or invest with any advisors or hedge funds. The advisors, hedge funds and other analysts who may post on IB Traders' Insight are independent of IB and IB does not make any representations or warranties concerning the past or future performance of these advisors, hedge funds and others or the accuracy of the information they provide. Interactive Brokers does not conduct a "suitability review" to make sure the trading of any advisor or hedge fund or other party is suitable for you.

Securities or other financial instruments mentioned in the material posted are not suitable for all investors. The material posted does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before making any investment or trade, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice. Past performance is no guarantee of future results.

Any information provided by third parties has been obtained from sources believed to be reliable and accurate; however, IB does not warrant its accuracy and assumes no responsibility for any errors or omissions.

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