Posts Tagged ‘puts’

Oil Put Demand, That Is

$WTIC chart

 

Cancel that Prius, just like commodity technicians Fall Out Boy once sang, "Oil, We’re Going Down".

OK, it was Sugar. But Oil is definitely going lower. Seriously.

Why you ask? Because the puts are overpriced, says Bloomberg.

The gap between prices of options betting on a decline and those that would profit from a rise in oil widened to a record 10 percentage points, according to five years of data compiled by Banc of America Securities-Merrill Lynch. Crude stockpiles in the U.S. are 14 percent larger than a year ago and OPEC is pumping 600,000 barrels a day more than the world needs, according to the International Energy Agency.

…..Options granting the right to sell, or put, oil in December below current prices have a so-called implied volatility of 54.3 percent, compared with 43.3 percent for the equivalent options to buy, or call, data from the New York Mercantile Exchange show.

The premium for December and other put options shows “the market is worried,” said Harry Tchilinguirian, a senior oil analyst at BNP Paribas SA in London. “If puts are pricing higher than calls, we are looking at a situation where the market is more averse to the downside and is looking for more compensation” for the option, he said.

Demand for puts may be caused by speculators betting on lower prices or by producers hedging against a decline in the value of their oil, Tchilinguirian said.

Well technically they don’t say the options will be right, it’s just presented as consistent with everything else in the article that points to an oil decline. But since we’re an options site (sort of) let’s stick with this.

As my friends Jared and Don would surely agree, Bloomberg gets a bit "so-called" happy. News-flash: It’s not "so-called" implied volatility you refer to, it IS implied volatility.

But more important than semantics, it’s unclear what options we compare here. Are we talking puts and calls of the same strike, in which case the disparity of put volatility to call volatility is about cost of carry, and not sentiment.

(I mean so-called cost of carry and so-called sentiment).

Are "equivalent options…
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Educational Videos

The following is a collection of podcasts and videos from the Options Clearing Corporation and selected others.

The cover a lot of ground and new ones are occasionally added to their site.  They are not as good as the coursework from MarketTamer, who are Option Sage’s excellent group but these are free (as opposed to $99 a month with Sage’s PSW special) so take a peek at the subjects that interest you:

First up is a very good introduction to options basics from Adam Lass, a very good overview.  His next episode is the basics of call options – hopefully he’ll do more.  Then we have the podcasts from OCC: 

 

 
  Introduction to Financial Markets and Options Basics  View
 
 
  An Exploration of Basic Options Terminology  View
 
 
  Options Basics  View
 
 
 


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Solving the Options Problem, Part 1

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Constructing equivalent option positions,… 

Solving the Options Problem, Part 1

Courtesy of Minyanville, by Mark Wolfinger 

One of the interesting features about options is that there’s a relationship between calls, puts, and the underlying stock. And because of that relationship, some option positions are equivalent -- that means identical profit/loss profiles — to others.

Why is that important? You’ll discover that some option combinations -- called spreads -- are easier, or less costly to trade than others. Even with today’s low commissions, why spend more than you must?

The basic equation that describes an underlying and its options is: Owning one call option and selling one put option (with the same strike price and expiration date) is equivalent to owning 100 shares of stock. Thus,

S = C - P; where S = stock; C = call; P = put

If you want a simple proof that the above equation is true, consider a position that’s long one call and short one put. When expiration arrives, if the call option is in the money, you exercise the call and own 100 shares. If the put option is in the money, you’re assigned an exercise notice and buy 100 shares of stock. In either case, you own stock.

Note: If the stock is at the money when expiration arrives, you’re in a quandary. You don’t know if the put owner is going to exercise the put. Therefore, you don’t know whether to exercise the call. If you want to maintain the long stock position, the simplest way out is to buy the put -- paying $0.05 or less — and exercise the call.

Example of Equivalent Positions

There’s one equivalent position that you, the options rookie, should know, because these are strategies you’re likely to adopt.

Take a look at a covered-call position (long stock and short one call), or S - C.

From the equation above, S - C = -P. In other words, if you own stock and sell one call option (this is covered-call writing), then your position is equivalent to being short one put option with the same strike and expiration. That position is naked short the put. Amazingly, some brokers don’t allow all clients to sell naked puts, but they allow all to write covered calls. The world isn’t always efficient (you already…
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Zero Hedge

Today's Stock Market Is A Casino Powered By Easy Money And Boredom

Courtesy of ZeroHedge View original post here.

Via Birch Gold Group,

We are already aware of Federal Reserve Chairman Jerome Powell’s stance on rates and inflation (at least for the immediate future).

That loose monetary policy has the potential to inflate a big asset bubble on its own. But that isn’t the only Fed policy that could be (at least indirectly) wreaking havoc on the economy.

The first Fed...



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ValueWalk

Adversity and Pandemics: Dr Yosef Alhasany's Innovative Perspective on Psychoanalysis

By Adriaan Brits. Originally published at ValueWalk.

  • The WHO pointed out that the pandemic caused mass trauma bigger than that of WWII
  • A unique and ‘medically realistic’ approach provides new, innovative insights and paves the way towards a much brighter future in today’s challenging and stigma-infested society in relation to Mental Health.
  • With the arrival of COVID-19 mental health issues have seen a drastic incline worldwide, and more people are now looking for a form of therapy that actually works. 

The adversity brought by the global pandemic, have experts rethink mental health provisions, most notably, access to ass...



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Phil's Favorites

Goldman, Bank Of America Made Hundreds Of Millions From Texas Blackouts

 

Embed from Getty Images

 

Courtesy of ZeroHedge

Who needs Enron when you have taxpayer-backed "banks."

Whereas 20 years ago, it was Enron that made billions from the California electricity crisis (which it caused), a scandal which culminated with Enron's scandalous and convoluted bankruptcy, this time it is pristine banks such as Goldman and Bank of America that made hundreds of millions of dollars in revenue as tens of millions of Texans were stuck in the dark.

A...



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Chart School

Who is King? The Bond Market or the FED

Courtesy of Read the Ticker

The King Arthur story is battle between a false KING and the true KING. Generally the movie involves surprises, love and violence, and all this coming to the risk on markets very soon. 

The financial blog space expects the FED to do some sort of Yield Curve Control (YCC) to hold interest rates down while inflation moves higher, this is allowing inflation to run hot. The FED wishes to do this over time to deflate the debt away. Very similar to the 1940's post WW2, yields were pegged to 2% and risk on assets went sky high.

However Peter Boockvar suggest the FED may soon learn it is not in control and the true king of the markets is the BOND MARKET. Peter says simply the bond market is telling the FED to bite me!

The FED is not us...

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Biotech/COVID-19

88% Of COVID Deaths Occurred In Countries Where Over Half Of Population Overweight

Courtesy of ZeroHedge View original post here.

A new report by the World Obesity Federation found that 88% of deaths in the first year of the pandemic occurred in countries where over half of the population is classified as overweight - which is defined as having a body mass index (BMI) above 25. Of note, BMI values above 30 - considered obese - are associated with 'particularly severe outcomes,' accor...



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Kimble Charting Solutions

Tech Indicator Peaking Again At Dot.com Highs? Joe Friday Says Watch This Index!

Courtesy of Chris Kimble

Technology is at the heart of our economy… the same way that industrials were 100 years ago.

And that leadership has been present in the stock market for the past two decades. Today’s chart illustrates this… as well as a potential “pause” in that leadership vacuum.

Below is a long-term “monthly” ratio chart of the Nasdaq Composite versus the S&P 500 Index. Here you can see how technology stocks...



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Politics

Why repressive Saudi Arabia remains a US ally

 

Why repressive Saudi Arabia remains a US ally

A demonstrator dressed as Saudi Arabian Crown Prince Mohammed bin Salman with blood on his hands protests outside the Saudi Embassy in Washington, D.C., on Oct. 8, 2018. Jim Watson/AFP via Getty Images

Courtesy of Jeffrey Fields, USC Dornsife College of Letters, Arts and Sciences

Saudi Crown Prince Mohammad bin Salman “approved an operation … to capture or kill Saudi journalist Jamal Khashoggi,” according to a...



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Mapping The Market

Which Governments Ordered Johnson & Johnson's Vaccine?

 

Which Governments Ordered Johnson & Johnson's Vaccine?

Courtesy of Niall McCarthy, Statista

On Wednesday, U.S. regulators announced that Johnson & Johnson's Covid-19 vaccine being developed by its subsidiary Janssen Pharmaceuticals in Belgium is effective at preventing moderate to severe cases of the disease. The jab has been deemed safe with 66 percent efficacy and the FDA is likely to approve it for use in the U.S. within days.

The Ad26.COV2.S vaccine can be stored for up to three months in a refrigerator and requires a single shot, ...



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Digital Currencies

Crypto - It Is Different This Time

 

Crypto – It Is Different This Time

Courtesy of Howard Lindzon

?I have been astonished as you know by the growth of crypto.

I remember back in 2017 when I noticed that Stocktwits message volume on Bitcoin ($BTC.X) surpassed that of $SPY. I knew Bitcoin was here to stay and Bitcoin went on to $19,000 before heading into its bear market.

Today Bitcoin is near $50,000.

Back in November of 2020, something new started to happen on Stocktwits with respect to crypto.

After the close on Friday until the open of the futures on Sunday, all Stocktwits trending tickers turned crypto. The weekend messages on Stocktwits have increased 400 percent.

That has continued each weekend...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

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Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

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Mike will show off the TradeExchange's new platform which you can try for free.  

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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