Skip to main content

Trades ideas under high volatility

Brian Stutland, contributor to CNBC's Options Action shown on Fridays, recommends to take advantage of high premium of option when VIX is above 40. Specifically, he recommends selling naked puts such as July SPY 105 puts and use the proceeds to invest in treasury bond; or sold covered calls for QQQQ.
VIX only go above 45 around 10 times: Russian financial crisis, Long Term Capital Management fallout, 911 world trade center attacks, worldCom bankruptcy filling, lehman brothers collapse. Only in 2008 VIX continued to go higher to 80 and it is highly unlikely to sustain the 40s level.

CNBC Option Action May20
CNBC Option Action May21

Comments

Post a Comment

Popular posts from this blog

The Week in Review

One of the questions I get most from clients is how to generate yield when the Fed is on hold with rates at zero. For a while many defensive clients were content receiving their 3% annual yield from Treasury bonds, but the Fed’s most recent meeting minutes shows that the Fed’s pace of bond buying may soon slow. While I do not think tapering is likely before year end (unless economic data accelerates significantly) the bond market is forward looking and already beginning to price tapering in. Smaller Fed purchases of Treasury bonds will mean that bond yields go up and bond prices go down. Bonds have been in a multi-year bull market, and we may now be on the cusp of a multi-year bear market. The most important indicator to watch is the 10-year yield, which cracked the 2.10% level this week for the first time in a year. If we continue to hold above 2.05% in June, the top is likely in for bonds and borrowing rates will be on the rise for everyone, including the US Treasury. So, how am ...
2 comments
Read more