Just a few weeks ago it seemed like we heard daily reports of the impending recession. Yields had dropped to lows not seen in a few years and pundits on the financial channels got defensive in their security allocations. Fast forward just 20 days and today the market is on pace to reach a new fresh all-time high.
In the past week we are once again reminded of the risk inherent in holding un-hedged single concentrated stocks. We know historically non-diversified holdings of a single issue have more than double the expected volatility or standard deviation than the market indexes.
In a special Halloween HiPOS blog edition, we announce that ZEGA executed a new position consisting of a short put spread on the S&P 500 Index (SPX).
After our last HiPOS position expired at full profit the ZEGA trading team is hard at work scouring the market for a position that would qualify under our strict rules. However, that has not materialized yet. One reason is that volatility as illustrated above in the VIX Index chart, has shrunk of late.
Jay broke down how ZEGA sells premium when volatility is slightly elevated. See Jay’s video with Oliver Renick today on Morning Trade Live at TD Ameritrade Network.
With Friday’s October 18th expiration in view we are now in the home stretch. This edition of the HiPOS trade was interesting in that we entered the position at the recent highs of the market. We also used a short put strike lower than the normal market calculations would have suggested.