Articles by tag - spy

Why You Should Hate VXX
I do not like to play games where the odds are consistently stacked against me. When you play at a casino you know that over the long haul, you are helping to pay for the marble floors. If you do want to play at the casino, you at least want to play the games where the odds are closer to even so that you can enjoy a few more watered down complimentary beverages. In the trading world, I do not want to be swimming upstream.
Posted on October 21, 2010 by
Volatility Says to Buy the Dips
It was a rather ugly day in the cash markets with the S&P 500 down 1.59%, but volatility remained rather subdued.
Posted on October 20, 2010 by
Understanding Real Returns
Nearly a year ago I talked about the continued devaluation of the dollar since going off the gold standard in 1971. The truth is that politicians around the world will continue to tax citizens through inflation unless they are forced to tie fiat currencies to some sort of hard commodity. One way to see this is to look at the purchasing power of the dollar in 1967 versus the purchasing power of the dollar in 2010. The fact is that if you held had a $1 bill in 1967 and you held it until today, you could now buy $.15 of goods. The dollar has lost 85% of its value and it has served as a 4% annual tax on the US citizen. If you earned $100,000 in 1967 and never got a raise you effectively earn $15,000 today, assuming you are still working.
Posted on September 30, 2010 by
Investing for the Wrong Future
One of the greatest fallacies of investing is the dependence on historical data and returns for the basis of investment decisions. You will often hear investors saying, “over the long-run stocks always beat bonds!” Recently, the opposite has been said because bond returns have trumped stocks in the last 30 years. This must mean that bonds are better investments than stocks right? These are false conclusions. What really matters is what is going to happen in the future, not what happened in the past.
Posted on September 28, 2010 by
Understanding the S&P 500 VEQTOR Index
It is unfortunate that there are not more mutual funds or ETF’s that directly enhance long equity positions with option overlays. I have covered the enhanced Sharpe ratios (risk-adjusted returns) that often accompany these strategies. I was surprised to find out that Direxion is going to bring the S&P 500 Dynamic VEQTOR Index to the mainstream retail investor packaged nicely in a simple ETF. As a follow-up to my readers’ requests when I first described the strategy’s performance, I want to take a closer look at just how the index makes systematic calls on implied volatility and how it has achieved such stellar returns.
Posted on July 30, 2010 by
Will Taking Risk Reward?
It seems that the market is in a precarious position. After a few months of very weak trading, we have experienced a fairly significant 10% bounce off of the lows and now the S&P 500 sits within a few points of June highs. The positive price action stems from decent corporate earnings results and outlooks, short covering, a bounce in the Euro, and the release of European bank stress tests (for whatever they are worth).
Posted on July 27, 2010 by
Six Days of Nonsense
It has been about 7 months exactly since I wrote Expect the Unexpected. The last six trading days have been a glorious example of unpredictable trading in the equity markets. During those six days, the S&P 500 has fallen 6% and then regained nearly all of its ground.
Posted on July 08, 2010 by
Long-Dated Volatility Opportunities
Long dated options might not be the most sexy options to sell, but maybe that is why they often seem to be more attractive.
Posted on June 17, 2010 by
Extreme Fear in S&P 500 Option Skew
The public often uses the VIX as the standard measure of “fear” in the overall market. I prefer to look at option skew instead. Skew tells the investor how much out-of-the money puts are being bid up versus out-of-the money calls.
Posted on June 08, 2010 by
All Eyes on the Euro: How to Trade a Crisis
Drop your investment thesis and watch the currency markets. Nothing currently matters except for the state of the Eurozone and its ultimate resolution.
Posted on May 20, 2010 by
Markets Collapsing or Trading Errors Amplified?
If you looked at today’s S&P 500 chart, you would have thought there was another massive terrorist attack. Instead, we have riots in the streets of Greece….the 28th economy of a world, making up a massive .57% of world GDP.
Posted on May 07, 2010 by
Volatility of Volatility: Can we Count on a Reversion to the Mean?
In derivatives, complexity can build upon itself quickly. It is difficult enough to understand the volatility of linear financial instruments such as stocks and bonds, but exploring the world of option volatility opens a whole new world of possible analysis.
Posted on May 04, 2010 by
Relative Value: Stocks Versus Bonds
Income is a crucial aspect of all investment strategies. In my previous post, “Income from Equities or Bonds“, I made an unbiased argument that the dividend yield from stocks looked better than the income from most fixed income investments. That view remains true even though the yield on 10 year bonds has increased by 20 bps since that article on March 6th. By looking at the dividend yields of large cap stocks drawn from the S&P 500 versus the 10 year treasury yield, we can see that some stocks still look like a good value versus fixed income.
Posted on April 13, 2010 by
Volatility: Positioning for a Spike
With the VIX closing near 2 year lows at 18 and the S&P 500 sitting at its 18 month high, it might seem that the clouds have parted. On the contrary, with pressure being put on China to revalue the renmimbi, a Dodd plan with the “most sweeping financial overhaul since the ’30s“, the end of the Fed MBS purchase program looming, and political arguments rising over assistance for Greece it seems to me that now would be a good time to hedge your bets.
Posted on March 16, 2010 by
Liquidity and Volatility
Equity volatility might seem to have little to do with the level or shape of interest rates, but after a bit of exploration we might be able to draw some solid conclusions.
Posted on March 12, 2010 by

Financial Video

Hard Ways to Earn Money: Babysitting Nightmare - Find out the easier way to save and earn more.
Posted on February 17,2012
Municipal Bond Market Review - Feb 2010 (Part I)
Posted on December 16,2010

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