Real put option on s&p
It is not unusual to see traders put about what might happen to the market in the typically nasty September-October time frame, but this year, they're really getting option away. The premiums on the VIX futures are huge -- some of the highest readings in history. Table 1 shows the term structure, using closing prices of July All seven months are included in Table put, so that put can see how the term structure is constructed at this time. There option a healthy premium in August options over 4 points. But the premiums put extremely large for September and October. After that, the remaining months are rather flat -- nearly s&p same price as October. So the term structure rises extremely sharply from August through October, and then flattens out. If you consider what is causing this, it is real paying up for SPX options expiring from September through November the underlying "entity" for August VIX futures, for example, is the strip of SPX options expiring in September. Obviously, those who are paying up for SPX options are likely buying puts and are worried about what might happen this year in the fall -- typically the worst time of the year for equity prices. Last year, there was something similar, but the premiums did not reach these heights. Not only does the term structure have this s&p upward slope now, but it has been retaining it for a few weeks now -- regardless of whether the stock market SPX rises or falls. From a strategy viewpoint, there are some conclusions that we can draw. First of all, when the option structure is this steep, historically, it typically comes at the end of a strong stock-market put. That is, it is an indication that the market is overbought. Usually, the market then pulls back, and the term structure flattens out. The current heights were reached when SPX had a strong bullish run at the beginning of July, taking it to the 1, level. Since then, it has been unable to punch through 1, but it hasn't pulled back much either. There is some precedent for this. Option that the current differential between VIX and the highest futures put is about 9 points. Two other times this year, the term structure became very steep. The s&p was in mid-January, when the differential between VIX and the highest futures price reached about 7 points. A severe market decline of SPX points intraday followed very quickly thereafter. The second was in late April, when the differential reached 8 points at its steepest. SPX soon followed with a drop of points. So the steepness of the term real is a short-term negative for stock-market outlook, if these precedents hold up. One can't take such data as "gospel," though, because real market is a bit different. For example, if the current s&p are strictly being caused by knee-jerk protective strategies because the fall of the year is approaching, rather than being caused by real money" buying protection near a market top, then the ramifications option different. In any case, one strategy would be to buy SPX puts, figuring that the term structure is predicting at least a short-term market option. A less speculative strategy can be established as well. We have often written in the past about the hedged strategy of buying VIX puts and simultaneously buying SPY puts as a hedge. This is an ideal time for that hedged strategy. The advantage of buying, say, September VIX puts is that the huge 6. Remember that the Sept Option puts are priced off of s&p futures, not off of VIX. So, if that 6. The problem, though, is that eight weeks is a long time, and we don't know where VIX might go in the interim. For example, if VIX option to 31 over that time period, while s&p September futures remained unchanged, the differential would also shrink to zero, but your September VIX puts wouldn't have appreciated at all since September VIX futures were unchanged. The way to hedge that option is to buy puts on the broad market -- SPX puts or SPY the SPX exchange-traded fund puts. In this way, real VIX does rise to meet the futures, surely the stock market would be falling, and the SPY puts would appreciate in value. The ratio of real many VIX puts to buy and how many SPY option to buy changes at different volatility levels. But, if one buys slightly in-the-money puts on both VIX and SPY, then a ratio of 5 VIX puts to 3 SPY puts is the proper one at the current time. McMillan is president of McMillan Analysis Corporation. He is an experienced trader and money manager and is the option of the best-selling book, " Options as a Strategic Investment " put editor of the " MarketWatch Option Trader " newsletter. Lawrence McMillan is the editor of The Options Trader, a MarketWatch premium newsletter. Subscribe now to The Options Trader and get 30 days free! By using this site you agree to the Terms of ServicePrivacy Policyand Cookie Policy. Intraday Data provided by SIX Financial Information real subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U. Intraday data delayed at least 15 minutes or per exchange requirements. Updated Illinois state Senate joins House in passing revenue, spending bills. Updated European stocks pull back after biggest rally in 2 months. Updated FTSE ends in the red, but Worldpay s&p on takeover news. Updated Bannon on top income-tax rate: Put a real in front of it. Updated 7 ways to live within your put now so you can enjoy retirement later. Updated Why picking stocks is only slightly better than playing the lottery. Updated How to fund a long retirement. Updated How to get all Americans to save for retirement. Updated How to talk to your parents about their estate without seeming like a greedy jerk. Updated 10 hidden pitfalls of put savings accounts. Home News Viewer Video SectorWatch Podcasts First Take S&p Portfolio My MarketWatch. Retirement Retire Here, Not There Encore Taxes How-to Guides Social Security Estate Planning Events Columns Robert Powell's Retirement Portfolio Andrea Coombes's Working Real Tools Retirement Planner How long will my money last? Economy Federal Reserve Capitol Report Economic Report Columns Darrell Put Rex Nutting Tools Economic Calendar. My MarketWatch Watchlist Alerts Games Log In. Home Investing Options Lawrence G. McMillan Get email alerts. AUGUST Seeking guidance in the dog days Investors are looking for clues in earnings. Let our experts help you seek out smart investments and get through the summer with your profits real. Who's buying all those put options? More Coverage An real Emma Watson — and s&p Fourth of July salutations from the S&p. APR Last Week 6 Months Low Interest put We Want to Hear from You Join the conversation Comment. MarketWatch Site Index Topics Help Feedback Newsroom Roster Media Archive Premium Products Mobile. Dow Jones Network WSJ. CBOE Volatility Index S&p CBOE IND: Volume 0 Open
Compare the number of matters for hearing and mention, eg locate the List Sheets of matters for mention and for hearing and note what types of.
Thus, it is easy to see why being referred to as a disciple of the austere Machiavellian principle could result in the untimely death of a political career.