October 31, 2017
October 31, 2017 Reading the Cone Graphics What are the cones on the price graphics — and what’s the significance of the colors? I’ll explain… The cone represents a 30-day theoretical expected price range — the larger the cone, the greater the expectation of stock price move. The cones are calculated using the option’s implied volatility. The higher the implied volatility, the larger the expected move of the underlying stock and thus the greater the breadth of the cone. The color of the cone is significant. The darker the color, the more “extreme” the implied volatility (IV) which is represented by implied volatility rank (IV Rank). The higher the IV Rank, the more expensive the prices of the options have been historically. This information can help you decide on a trading strategy.
Theoretically, 68% of prices fall within the boundary.
IV Rank near 100%
IV Rank near 0%
What Are We Looking At? The charts on the right are many of the stocks and etfs that we are looking at. See the next two pages of Cherry Picks for more information. Cherry Picks Futures Edition Pete Mulmat’s “Futures Edition” Cherry Picks was sent out on Sunday — a cheat sheet showing popular futures, their notional sizes, and their etf equivalents — it is super useful information for anyone interested in futures. If you didn’t receive it, please reach out. We welcome comments/feedback. Best of luck in this week’s trading. Michael Rechenthin, PhD Kai Zeng [email protected]
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest.
3-Month Correlation Matrix of Price Returns
What Do We Find Interesting? • The Utilities etf (XLU) continues to provide nice diversification with the S&P 500 (SPY) — and implied volatility is getting to be more expensive. This is starting to make this an ideal ETF to begin selling premium in. • The Oil Services etf (OIH) seems to have recovered a bit from selling that occurred last week. IV Rank is relatively low (20%), but an implied volatility of 26 makes options in OIH have twice as much premium in them than the S&P 500 (SPY). • We are keeping sizes relatively small in the metals — low implied volatility in Silver (SLV) and Gold (GLD) make them not as attractive as premium sellers. The correlation between Gold (GLD) and the S&P 500 (SPY) are currently slightly negative (-0.35) — expect to see this relationship strengthen and the negative correlation get stronger if stocks begin to sell off. At least that is what usually happens. • Junior Gold Miners (GDXJ) has had some large moves over the past month — down 7%. IV Rank might be on the low side, but with an implied volatility near 30, and the large movements, it looks fairly appealing from a contrarian standpoint. • Healthcare (XLV) continues to be in the news — currently the liquidity is surprisingly poor, which is unfortunate considering IV Rank is beginning to look good. Look toward some of the big capitalization individual stocks if you want to play this sector. • Expect to see the relationship between the major market indices, S&P 500 (SPY), the small-cap Russell 2000 index (IWM), and the Nasdaq (QQQ), strengthen if we begin to have some selling in the market.
© tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 2 of 10
Popular ETFs DIA EEM EFA EWZ FEZ FXI GDX GDXJ GLD
Dow Emerging Index Fund MSCI EAFE Brazil Euro Stoxx 50 China Large Cap Gold Miners Junior Gold Miners Gold
IWM KRE OIH QQQ SLV SPY TLT XBI XLB
Russell 2000 ETF Regional Banking Oil Services Nasdaq 100 Silver S&P 500 20+ Year Treasury Bond ETF Biotech Materials
XLE XLF XLI XLK XLP XLU XME XOP XRT
Energy Select Sector Financial Industrial Tech Consumer Staples Utilities Metals and Mining Oil & Gas Exploration & Product Retail
What Has High Implied Volatility? • Brazil (EWZ) has a nice combination of high implied volatility (e.g. nearly 3x as much premium as the S&P 500) and historically expensive options (i.e. high implied volatility rank) • Tech (XLK) and Euro currency (FXI) and Retail (XRT) are all displaying implied volatility ranks near 50%. • Not shown on the scatter plot above, but General Electric (GE), A&T (T), Apple (AAPL), CVS, Facebook (FB), Cisco (CSCO), Disney (DIS), Intel (INTC), Wal-Mart (WMT), and Costco (COST) all have high implied volatility rank.
© tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 3 of 10
Earnings season is coming to an end. Seen below are some of the stocks with earnings we are keeping our eye on. We highlighted the ones that are on our “tastytrade watchlist.” Symbol Description
Expected Report Date
Time of Day
Weekly In Options Dow?
In S&P In Russell In tastytrade Market Cap 500? 2000? Watchlist? (Billions)
X
United States Steel
Tue Oct-31
After Close
Yes
-
-
-
Yes
5
EA
Electronic Arts
Tue Oct-31
After Close
Yes
-
Yes
-
-
36
3D Systems
Tue Oct-31
After Close
Yes
-
-
Yes
-
1
Wed Nov-01 Before Open
Yes
-
-
Yes
-
3
Wed Nov-01 After Close
Yes
-
Yes
-
Yes
522
GPRO GoPro, (Class A)
Wed Nov-01
Yes
-
-
Yes
-
1
RIG
Wed Nov-01 After Close
Yes
-
Yes
-
Yes
4
Wed Nov-01
After Close
Yes
-
Yes
-
-
81
Wed Nov-01
After Close
Yes
-
-
Yes
-
4
DDD
GRPN Groupon FB
Facebook Transocean Ltd
QCOM QUALCOMM YELP
Yelp
After Close
TSLA Tesla
Wed Nov-01 After Close
Yes
-
-
-
Yes
53
SHAK Shake Shack (Class A)
Wed Nov-01
After Close
Yes
-
-
Yes
-
1
APA
Apache
Thu Nov-02
Before Open
Yes
-
Yes
-
-
16
YUM
Yum! Brands
Thu Nov-02
Before Open
Yes
-
Yes
-
-
26
CHK
Chesapeake Energy
Thu Nov-02
Before Open
Yes
-
Yes
-
-
3
Thu Nov-02 Before Open
Yes
-
-
-
Yes
462
BABA Alibaba Group RL
Ralph Lauren
Thu Nov-02
Before Open
Yes
-
Yes
-
-
7
ATVI
Activision Blizzard
Thu Nov-02
After Close
Yes
-
Yes
-
-
49
SBUX Starbucks
Thu Nov-02 After Close
Yes
-
Yes
-
Yes
80
AAPL Apple
Thu Nov-02 After Close
Yes
Yes
Yes
-
Yes
861
Thu Nov-02 After Close
Yes
-
-
-
Yes
2
Yes
-
Yes
-
-
26
Mon Nov-06 Before Open
Yes
-
Yes
-
-
70
KORS Michael Kors Holdings Limiteds Mon Nov-06 Before Open
Yes
-
Yes
-
-
7
PCLN The Priceline Group
Mon Nov-06 After Close
Yes
-
Yes
-
Yes
92
TRIP
TripAdvisor
Mon Nov-06
After Close
Yes
-
Yes
-
-
5
COH
Coach
Tue Nov-07
Before Open
Yes
-
Yes
-
-
11
Wed Nov-08 Before Open
Yes
-
Yes
-
-
37
Thu Nov-09
Before Open
Yes
-
Yes
-
-
6
NVDA NVIDIA
Thu Nov-09
After Close
Yes
-
Yes
-
-
122
DIS
Thu Nov-09 After Close
Yes
Yes
Yes
-
Yes
151
P
Pandora Media
RCL
Royal Caribbean Cruises Ltd.
CVS
CVS Health
HUM Humana M
Macy's Inc Walt Disney
© tastytrade.com, 2017
Fri Nov-03
n/a
Michael Rechenthin, PhD | Kai Zeng
Page 4 of 10
Stocks and ETFs with an upcoming dividend. In the money short call options are the only options at risk of additional early assignment due to the dividend. If the extrinsic value of the in the money short call is less than the dividend, the option is at (a greater than average) risk of being assigned. Symbol Description
Ex-Dividend Date
Dividend Per Share
In Dow?
In S&P In Russell 500? 2000?
In tastytrade Watchlist?
WFC
Wells Fargo &
Thu, Nov 02
0.39
-
Yes
-
-
UN
Unilever NV
Thu, Nov 02
0.422
-
-
-
-
KKR
KKR & Co. L.P.
Fri, Nov 03
0.17
-
-
-
-
NBL
Noble Energy
Fri, Nov 03
0.1
-
Yes
-
-
MET
MetLife
Fri, Nov 03
0.4
-
Yes
-
-
C
Citigroup
Fri, Nov 03
0.32
-
Yes
-
Yes
INTC
Intel
Mon, Nov 06
0.273
Yes
Yes
-
-
FE
FirstEnergy
Mon, Nov 06
0.36
-
Yes
-
-
TJX
TJX Companies
Wed, Nov 08
0.313
-
Yes
-
-
GSK
GlaxoSmithKline PLC
Thu, Nov 09
0.499
-
-
-
-
BBT
BB&T
Thu, Nov 09
0.33
-
Yes
-
-
PFE
Pfizer
Thu, Nov 09
0.32
Yes
Yes
-
-
Additional upcoming ex-dividends in popular etfs: Wed, Nov 01 HYG, LQD, TLT, IEI, GOVT, IEF, TIP, PFF, IPFF, JNK
© tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 5 of 10
Some of the most popular segments include:
Date
Segment
Title
Link
Tue, Oct 31
Market Measures
Short /ES & Short SPY Strangles
LINK
Tue, Oct 31
Options Jive
Stacking the Deck
LINK
Tue, Oct 31
Strategies for IRA
Trades For Your IRA: Getting Started
LINK
Mon, Oct 30
Market Measures
FOMC and Trading Opportunities
LINK
Mon, Oct 30
Options Jive
Calculating Expected Moves Using Options
LINK
Mon, Oct 30
Best Practices
Risk & Reward of Strategies
LINK
Fri, Oct 27
tasty Extras
TP Says | Using Futures
LINK
Fri, Oct 27
tasty Extras
Sosnoff Says | Opportunity is Now
LINK
Fri, Oct 27
tasty Extras
The 3rd Industrial Revolution | Money
LINK
Fri, Oct 27
Market Measures
The Importance of Being Neutral
LINK
Fri, Oct 27
Resize & Analyze
Week of October 23rd
LINK
Fri, Oct 27
Closing the Gap - Futures Edition
Euro/Yen at an Extreme
LINK
Thu, Oct 26
Market Measures
Contract Size & Tail Risk
LINK
Thu, Oct 26
Options Jive
Implied Volatility & Two Types of Reversion
LINK
Thu, Oct 26
Trades From the Research Team LIVE
Trades From the Research Team LIVE
LINK
Wed, Oct 25
Market Measures
Portfolio Volatility - 1 SD Strangle
LINK
Wed, Oct 25
Options Jive
Visualizing Trading Expectations
LINK
Wed, Oct 25
tasty BITES
The Defining Effect
LINK
Tue, Oct 24
Market Measures
The Problem With VIX Calendars
LINK
Tue, Oct 24
Options Jive
Option Value Basics
LINK
Tue, Oct 24
Best Practices
Vertical Spreads
LINK
Mon, Oct 23
Market Measures
VVIX to VIX Ratio At All Time Highs?
LINK
Mon, Oct 23
Options Jive
Managing Ratio Spreads and Lizards
LINK
Mon, Oct 23
Anatomy of a Trade
Bad Timing, Good Mechanics in TLT
LINK
© tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 6 of 10
© tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 7 of 10
© tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 8 of 10
© tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 9 of 10
Reading this Report Expected Range Cone. The following pages show stocks and ETFs that the tastytrade Research Team currently find have relatively high or low volatility. The colored cone represents a 30-day expected theoretical price range that is calculated from the options’ implied volatilities. If the implied volatility is relatively high, then the market is expecting a larger price change in the underlying stock or ETF. From this we can derive the market’s 1 standard deviation theoretical expectation of where prices might be in the future. In other words, the market is expecting, with a 68% theoretical probability, that prices will fall within the boundary of the cone at the end of 30 days. Cone Color. The color of the cone is significant. The darker the color, the more “extreme” the implied volatility (IV) which is represented by implied volatility rank (IV Rank). This information can help you decide on a trading strategy.
Glossary IV. Implied Volatility is the estimated volatility of a security’s price derived from its option price; the higher the IV, the more expensive the option and therefore the larger the expected price move. IV is an annualized number of volatility, e.g. a IV of 27 means the option’s market is pricing in an annualized price range, either plus or minus, of 27%. IV Rank. IV by itself doesn’t tell us if if the volatility is high or low - but IV Rank does. An IV Rank of 70 means that the IV is 70% between its low and high IV over the past year. The higher the IV Rank, the higher the security’s IV is compared to its past year. We provide six levels to make evaluating easier: • Extremely High: IV Rank between 90 and 100 • High: IV Rank between 75 and 90 • Moderately High: IV Rank between 50 and 75 • Moderately Low: IV Rank between 25 and 50 • Low: IV Rank between 10 and 25 • Extremely Low: IV Rank between 0 and 10 Option Liquidity. At tastytrade we have our own theoretical measure of option liquidity, Poor, Moderate, Good, or Great. It examines the options’ bid/ ask spread, open interest, and the number of strikes with non-zero bids. Correlation with S&P 500. Correlation is a statistical measure of how strong a relationship two securities have with one another. A correlation of -1 means the stocks are perfectly negatively correlated (they move in opposite directions), while a correlation of +1 means the stocks are perfectly positively correlated (they move in the same direction). A correlation of 0 means there exist little relationship. Earnings. The earnings date of the security. In practice we tend to see stocks have a larger amount of implied volatility (IV) nearer to earnings as the market is pricing in the fear of the upcoming earnings announcement. In parenthesis, is BTO or AMC; "Before the Open" or "After Market Closes", respectively. Upcoming earnings dates do sometimes change.
Disclosures Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf tastytrade content is provided solely by tastytrade, Inc. and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Please read Characteristics and Risks of Standardized Options before deciding to invest in options. Futures accounts are not protected by the Securities Investor Protection Corporation (SIPC). All customer futures accounts' positions and cash balances are segregated by Apex Clearing Corporation. Futures and futures options trading is speculative and is not suitable for all investors. Please read the Risk Disclosure for Futures and Options prior to trading futures products found in Disclosures under the Documents tab. © tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 10 of 10
Theoretically, 68% of prices fall within the boundary.
IV Rank near 100%
IV Rank near 0%
What Are We Looking At? The charts on the right are many of the stocks and etfs that we are looking at. See the next two pages of Cherry Picks for more information. Cherry Picks Futures Edition Pete Mulmat’s “Futures Edition” Cherry Picks was sent out on Sunday — a cheat sheet showing popular futures, their notional sizes, and their etf equivalents — it is super useful information for anyone interested in futures. If you didn’t receive it, please reach out. We welcome comments/feedback. Best of luck in this week’s trading. Michael Rechenthin, PhD Kai Zeng [email protected]
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest.
3-Month Correlation Matrix of Price Returns
What Do We Find Interesting? • The Utilities etf (XLU) continues to provide nice diversification with the S&P 500 (SPY) — and implied volatility is getting to be more expensive. This is starting to make this an ideal ETF to begin selling premium in. • The Oil Services etf (OIH) seems to have recovered a bit from selling that occurred last week. IV Rank is relatively low (20%), but an implied volatility of 26 makes options in OIH have twice as much premium in them than the S&P 500 (SPY). • We are keeping sizes relatively small in the metals — low implied volatility in Silver (SLV) and Gold (GLD) make them not as attractive as premium sellers. The correlation between Gold (GLD) and the S&P 500 (SPY) are currently slightly negative (-0.35) — expect to see this relationship strengthen and the negative correlation get stronger if stocks begin to sell off. At least that is what usually happens. • Junior Gold Miners (GDXJ) has had some large moves over the past month — down 7%. IV Rank might be on the low side, but with an implied volatility near 30, and the large movements, it looks fairly appealing from a contrarian standpoint. • Healthcare (XLV) continues to be in the news — currently the liquidity is surprisingly poor, which is unfortunate considering IV Rank is beginning to look good. Look toward some of the big capitalization individual stocks if you want to play this sector. • Expect to see the relationship between the major market indices, S&P 500 (SPY), the small-cap Russell 2000 index (IWM), and the Nasdaq (QQQ), strengthen if we begin to have some selling in the market.
© tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 2 of 10
Popular ETFs DIA EEM EFA EWZ FEZ FXI GDX GDXJ GLD
Dow Emerging Index Fund MSCI EAFE Brazil Euro Stoxx 50 China Large Cap Gold Miners Junior Gold Miners Gold
IWM KRE OIH QQQ SLV SPY TLT XBI XLB
Russell 2000 ETF Regional Banking Oil Services Nasdaq 100 Silver S&P 500 20+ Year Treasury Bond ETF Biotech Materials
XLE XLF XLI XLK XLP XLU XME XOP XRT
Energy Select Sector Financial Industrial Tech Consumer Staples Utilities Metals and Mining Oil & Gas Exploration & Product Retail
What Has High Implied Volatility? • Brazil (EWZ) has a nice combination of high implied volatility (e.g. nearly 3x as much premium as the S&P 500) and historically expensive options (i.e. high implied volatility rank) • Tech (XLK) and Euro currency (FXI) and Retail (XRT) are all displaying implied volatility ranks near 50%. • Not shown on the scatter plot above, but General Electric (GE), A&T (T), Apple (AAPL), CVS, Facebook (FB), Cisco (CSCO), Disney (DIS), Intel (INTC), Wal-Mart (WMT), and Costco (COST) all have high implied volatility rank.
© tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 3 of 10
Earnings season is coming to an end. Seen below are some of the stocks with earnings we are keeping our eye on. We highlighted the ones that are on our “tastytrade watchlist.” Symbol Description
Expected Report Date
Time of Day
Weekly In Options Dow?
In S&P In Russell In tastytrade Market Cap 500? 2000? Watchlist? (Billions)
X
United States Steel
Tue Oct-31
After Close
Yes
-
-
-
Yes
5
EA
Electronic Arts
Tue Oct-31
After Close
Yes
-
Yes
-
-
36
3D Systems
Tue Oct-31
After Close
Yes
-
-
Yes
-
1
Wed Nov-01 Before Open
Yes
-
-
Yes
-
3
Wed Nov-01 After Close
Yes
-
Yes
-
Yes
522
GPRO GoPro, (Class A)
Wed Nov-01
Yes
-
-
Yes
-
1
RIG
Wed Nov-01 After Close
Yes
-
Yes
-
Yes
4
Wed Nov-01
After Close
Yes
-
Yes
-
-
81
Wed Nov-01
After Close
Yes
-
-
Yes
-
4
DDD
GRPN Groupon FB
Facebook Transocean Ltd
QCOM QUALCOMM YELP
Yelp
After Close
TSLA Tesla
Wed Nov-01 After Close
Yes
-
-
-
Yes
53
SHAK Shake Shack (Class A)
Wed Nov-01
After Close
Yes
-
-
Yes
-
1
APA
Apache
Thu Nov-02
Before Open
Yes
-
Yes
-
-
16
YUM
Yum! Brands
Thu Nov-02
Before Open
Yes
-
Yes
-
-
26
CHK
Chesapeake Energy
Thu Nov-02
Before Open
Yes
-
Yes
-
-
3
Thu Nov-02 Before Open
Yes
-
-
-
Yes
462
BABA Alibaba Group RL
Ralph Lauren
Thu Nov-02
Before Open
Yes
-
Yes
-
-
7
ATVI
Activision Blizzard
Thu Nov-02
After Close
Yes
-
Yes
-
-
49
SBUX Starbucks
Thu Nov-02 After Close
Yes
-
Yes
-
Yes
80
AAPL Apple
Thu Nov-02 After Close
Yes
Yes
Yes
-
Yes
861
Thu Nov-02 After Close
Yes
-
-
-
Yes
2
Yes
-
Yes
-
-
26
Mon Nov-06 Before Open
Yes
-
Yes
-
-
70
KORS Michael Kors Holdings Limiteds Mon Nov-06 Before Open
Yes
-
Yes
-
-
7
PCLN The Priceline Group
Mon Nov-06 After Close
Yes
-
Yes
-
Yes
92
TRIP
TripAdvisor
Mon Nov-06
After Close
Yes
-
Yes
-
-
5
COH
Coach
Tue Nov-07
Before Open
Yes
-
Yes
-
-
11
Wed Nov-08 Before Open
Yes
-
Yes
-
-
37
Thu Nov-09
Before Open
Yes
-
Yes
-
-
6
NVDA NVIDIA
Thu Nov-09
After Close
Yes
-
Yes
-
-
122
DIS
Thu Nov-09 After Close
Yes
Yes
Yes
-
Yes
151
P
Pandora Media
RCL
Royal Caribbean Cruises Ltd.
CVS
CVS Health
HUM Humana M
Macy's Inc Walt Disney
© tastytrade.com, 2017
Fri Nov-03
n/a
Michael Rechenthin, PhD | Kai Zeng
Page 4 of 10
Stocks and ETFs with an upcoming dividend. In the money short call options are the only options at risk of additional early assignment due to the dividend. If the extrinsic value of the in the money short call is less than the dividend, the option is at (a greater than average) risk of being assigned. Symbol Description
Ex-Dividend Date
Dividend Per Share
In Dow?
In S&P In Russell 500? 2000?
In tastytrade Watchlist?
WFC
Wells Fargo &
Thu, Nov 02
0.39
-
Yes
-
-
UN
Unilever NV
Thu, Nov 02
0.422
-
-
-
-
KKR
KKR & Co. L.P.
Fri, Nov 03
0.17
-
-
-
-
NBL
Noble Energy
Fri, Nov 03
0.1
-
Yes
-
-
MET
MetLife
Fri, Nov 03
0.4
-
Yes
-
-
C
Citigroup
Fri, Nov 03
0.32
-
Yes
-
Yes
INTC
Intel
Mon, Nov 06
0.273
Yes
Yes
-
-
FE
FirstEnergy
Mon, Nov 06
0.36
-
Yes
-
-
TJX
TJX Companies
Wed, Nov 08
0.313
-
Yes
-
-
GSK
GlaxoSmithKline PLC
Thu, Nov 09
0.499
-
-
-
-
BBT
BB&T
Thu, Nov 09
0.33
-
Yes
-
-
PFE
Pfizer
Thu, Nov 09
0.32
Yes
Yes
-
-
Additional upcoming ex-dividends in popular etfs: Wed, Nov 01 HYG, LQD, TLT, IEI, GOVT, IEF, TIP, PFF, IPFF, JNK
© tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 5 of 10
Some of the most popular segments include:
Date
Segment
Title
Link
Tue, Oct 31
Market Measures
Short /ES & Short SPY Strangles
LINK
Tue, Oct 31
Options Jive
Stacking the Deck
LINK
Tue, Oct 31
Strategies for IRA
Trades For Your IRA: Getting Started
LINK
Mon, Oct 30
Market Measures
FOMC and Trading Opportunities
LINK
Mon, Oct 30
Options Jive
Calculating Expected Moves Using Options
LINK
Mon, Oct 30
Best Practices
Risk & Reward of Strategies
LINK
Fri, Oct 27
tasty Extras
TP Says | Using Futures
LINK
Fri, Oct 27
tasty Extras
Sosnoff Says | Opportunity is Now
LINK
Fri, Oct 27
tasty Extras
The 3rd Industrial Revolution | Money
LINK
Fri, Oct 27
Market Measures
The Importance of Being Neutral
LINK
Fri, Oct 27
Resize & Analyze
Week of October 23rd
LINK
Fri, Oct 27
Closing the Gap - Futures Edition
Euro/Yen at an Extreme
LINK
Thu, Oct 26
Market Measures
Contract Size & Tail Risk
LINK
Thu, Oct 26
Options Jive
Implied Volatility & Two Types of Reversion
LINK
Thu, Oct 26
Trades From the Research Team LIVE
Trades From the Research Team LIVE
LINK
Wed, Oct 25
Market Measures
Portfolio Volatility - 1 SD Strangle
LINK
Wed, Oct 25
Options Jive
Visualizing Trading Expectations
LINK
Wed, Oct 25
tasty BITES
The Defining Effect
LINK
Tue, Oct 24
Market Measures
The Problem With VIX Calendars
LINK
Tue, Oct 24
Options Jive
Option Value Basics
LINK
Tue, Oct 24
Best Practices
Vertical Spreads
LINK
Mon, Oct 23
Market Measures
VVIX to VIX Ratio At All Time Highs?
LINK
Mon, Oct 23
Options Jive
Managing Ratio Spreads and Lizards
LINK
Mon, Oct 23
Anatomy of a Trade
Bad Timing, Good Mechanics in TLT
LINK
© tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 6 of 10
© tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 7 of 10
© tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 8 of 10
© tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 9 of 10
Reading this Report Expected Range Cone. The following pages show stocks and ETFs that the tastytrade Research Team currently find have relatively high or low volatility. The colored cone represents a 30-day expected theoretical price range that is calculated from the options’ implied volatilities. If the implied volatility is relatively high, then the market is expecting a larger price change in the underlying stock or ETF. From this we can derive the market’s 1 standard deviation theoretical expectation of where prices might be in the future. In other words, the market is expecting, with a 68% theoretical probability, that prices will fall within the boundary of the cone at the end of 30 days. Cone Color. The color of the cone is significant. The darker the color, the more “extreme” the implied volatility (IV) which is represented by implied volatility rank (IV Rank). This information can help you decide on a trading strategy.
Glossary IV. Implied Volatility is the estimated volatility of a security’s price derived from its option price; the higher the IV, the more expensive the option and therefore the larger the expected price move. IV is an annualized number of volatility, e.g. a IV of 27 means the option’s market is pricing in an annualized price range, either plus or minus, of 27%. IV Rank. IV by itself doesn’t tell us if if the volatility is high or low - but IV Rank does. An IV Rank of 70 means that the IV is 70% between its low and high IV over the past year. The higher the IV Rank, the higher the security’s IV is compared to its past year. We provide six levels to make evaluating easier: • Extremely High: IV Rank between 90 and 100 • High: IV Rank between 75 and 90 • Moderately High: IV Rank between 50 and 75 • Moderately Low: IV Rank between 25 and 50 • Low: IV Rank between 10 and 25 • Extremely Low: IV Rank between 0 and 10 Option Liquidity. At tastytrade we have our own theoretical measure of option liquidity, Poor, Moderate, Good, or Great. It examines the options’ bid/ ask spread, open interest, and the number of strikes with non-zero bids. Correlation with S&P 500. Correlation is a statistical measure of how strong a relationship two securities have with one another. A correlation of -1 means the stocks are perfectly negatively correlated (they move in opposite directions), while a correlation of +1 means the stocks are perfectly positively correlated (they move in the same direction). A correlation of 0 means there exist little relationship. Earnings. The earnings date of the security. In practice we tend to see stocks have a larger amount of implied volatility (IV) nearer to earnings as the market is pricing in the fear of the upcoming earnings announcement. In parenthesis, is BTO or AMC; "Before the Open" or "After Market Closes", respectively. Upcoming earnings dates do sometimes change.
Disclosures Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf tastytrade content is provided solely by tastytrade, Inc. and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Please read Characteristics and Risks of Standardized Options before deciding to invest in options. Futures accounts are not protected by the Securities Investor Protection Corporation (SIPC). All customer futures accounts' positions and cash balances are segregated by Apex Clearing Corporation. Futures and futures options trading is speculative and is not suitable for all investors. Please read the Risk Disclosure for Futures and Options prior to trading futures products found in Disclosures under the Documents tab. © tastytrade.com, 2017
Michael Rechenthin, PhD | Kai Zeng
Page 10 of 10
