We generally restrict iron condor trades in our paid newsletter and managed accounts to index products. For those who prefer ETFs, we look at SPY, DIA, IWM, QQQQ; otherwise, SPX, RUT, NDX, DJX are bigger proxies, or on the futures side of things we’ll look at the Emini S&P 500 or Nasdaq 100 (ES and NQ). The reason we trade index products is that diversification reduces the impact of company-level surprises: an iron condor on, say, RIMM will get punished if…
In this mini-series, we’re examining the value of beta as a measurement of risk. In this post, we want to examine how the betas of some popular stocks, indexes, and ETFs changed during 2008 and especially during the fall crash. First, we should clarify exactly what we’re measuring.
What is beta?
Beta is metric that describes the systemic risk of an asset or portfolio. Because it is not possible to alleviate all risk by simple diversification, investors and traders use beta to…
The inverse relationship between oil prices and equity markets still seems intact: as crude has sold off over the past week, markets have lifted, and some analysts have even tried charting an hour-by-hour mapping of the correlation. While we’re long-term bullish on oil (how could anyone not be?), we don’t anticipate an immediate or intense turn around in crude prices. At the same time, while the price of oil could certainly drift a bit lower, we don’t foresee any catalysts…
We got a round of the correlation game started this afternoon, but it went nowhere fast: either headline writers are getting smarter, or today’s action is just too tenuous even for them! We realize we’ve never codified the rules of this game before, so:
Get your officemates or pals together, and visit the financial homepage of any mainstream media outlet. Y! Finance, Bloomberg, even CNN Money will do.
Scan the top headline.
If the headline makes a dubious assumption about causation, everyone take a…
We published the following bonus trade for our members back on May 2:
Buy to open XLE June 70 put
Sell to open XLE June 72 put
Sell to open XLE June 90 call
Buy to open XLE June 92 call
for a net credit of $0.47 or better.
Anyone following this trade should have already exited – remember, we want to be out of any front month short options by Monday of expiration week at the latest. Negative gamma risk during expiration week is ever…
Monday, August 31, 2009
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