Our BlogOur current view on the market
It’s Iron Condor Time! As promised in a blog article earlier this week, we are back here to update all of you if something changed. While we currently had a short call spread as part of our HIPOS strategy, yesterday the traders found a qualifying short put spread trade. When you have both a short call spread and a short-put spread on the same underlying (Russell 2000 Index) and same expiration (February 16th), the total position is referred to as an Iron Condor trade. We find it easier to display the positions on a price chart rather than a risk graph as inserted above. But for those of you curious about the naming convention, it has to do with how a profit and loss options graph looks. Rather than get too technical, let’s focus on the addition of the put side and then wrap up with some clarification of the compete target profit due to both sides.read more
Today we saw the Russell 2000 sell off a bit and end the day near the lows. This brought the index back below 1600 and increased the distance away from our 1695 short strike price to over 6% out-of-the-money. Remember with a short call spread HIPOS position, your clients are rooting for the underlying index to remain BELOW the short strike.read more
A few note-worthy updates on the Internet Advantage Strategy (IAS). Updating Posture Our posture for IAS is currently bullish. Our posture measurements are very sensitive to the rotation of buyers and sellers in the market. I don’t know about any of you, but I don’t...read more
Our primary HIPOS trade which includes a short call spread on the Russell 2000 Index has witnessed the underlying index applying some pressure on the position. The Index as of midday Wednesday sits about 5.8% below the short 1695 call strike price level.read more
Last week ZEGA’s traders put on a short call spread ABOVE the Russell 2000 Index. After a spike higher, the index settled back and now sits roughly 7% away from the short 1695 level. There are 21 trading days left until the February 16th expiration. When we say trading days we exclude weekends and holidays when the market is closed.read more
Last month we posted for the first time ZEGA’s Buy and Hedge hedged equity performance against its peers. After the positive feedback and opportune end of year timeframe, we wanted to share the 2017 final data.read more
After running the numbers today ZEGA’s traders were able to find a short call spread trade that qualified under our rules for entry. Over the history of the HIPOS strategy, the times we have utilized the call side have been infrequent at best. We know that most...read more
Click here for a PDF version of our December performance...read more
2018 has opened the year higher amidst further low volatility and little fear in the markets. 2017 saw so little fear that the VIX Index closed below 10.00 over 50 times! The graph above, part of a recent Wall Street Journal article by Gunjan Banerji illustrates just how un-fearful investors have been over the past year. Statistically, 2017 would be considered a fairly large outlier event compared to previous years.
In the article there were a couple of main themes or attitudes Banerji uncovered:
Data Source: YCHARTS
As we enter 2018 volatility measured by the CBOE VIX Index is at historically low levels. Looking above at the chart we can see going back to 1990 where this current environment sits. So, what does this mean for a strategy like our HIPOS (High Probability Options Strategy)? Since we sell volatility far away from the current Index level, low volatility makes it more difficult to find trades which will qualify under our strict criteria. The reason being is that when volatility is extremely low, the premium available from the sale of a spread is depressed in value.