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This Week in Futures Options

Gold, crude oil, corn, soybeans and more - with so many tradeable products the futures options market is an intimidating place. How can you possibly keep track of the latest trading activity across so many different products? Don’t worry - we’ve got you covered. Welcome to This Week in Futures Options - the program designed to help active futures options traders stay on top of this ever-changing marketplace. Each week we’ll break down the top trades, hot products, volatility explosions and much more. Whether you’re an experienced veteran or a newcomer looking to separate the wheat from the lean hogs, This Week in Futures Options has the information you can’t find anywhere else...
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Now displaying: July, 2019
Jul 26, 2019

TWIFO 161: Crude Skew and other Mysteries

  • HOST: MARK LONGO, OPTIONS INSIDER MEDIA GROUP
  • CO-HOST: NICK HOWARD, BANTIX TECHNOLOGIES
  • CME HOTSEAT GUEST: ADAM WEBB, Founder of Macrohedged 

CRUDE OIL

Oil ends lower as support from storm-fueled, 11 million-barrel drop in U.S. crude supplies disappears

  • Oil futures settled lower on Wednesday, as support from a storm-induced, 11 million-barrel drop in U.S. crude supplies wore off and traders turned their attention back to concerns about weaker energy demand.
  • U.S. crude inventories dropped by 10.8 million barrels for the week ended July 19, according to data from Energy Information Administration Wednesday, and production also edged lower, with analysts citing temporary disruptions caused by a Gulf of Mexico storm earlier this month.

 

METALS

GOLD

  • Gold prices have lost their good gains seen earlier in the session and in overnight trade, following some stronger-than-expected U.S. economic reports.

Reasons Gold trade 

  • Skew was over done 
  • Could get size on 
  • Limited risk 
  • Didn’t want to play a full RR as there was silly blow out risk to 1500
  • So we looked at just the PSkew 

 

EQUITIES

 

  • VIX  13 - DOWN 1.25 FROM LAST SHOW - THREATENED THE 12 HANDLE RECENTLY
  • VVIX: 87.5 -  UP 3 FROM LAST SHOW
  • RVX: 15.80 -  DOWN .6 PTS 

 

  • VIX/RVX SPREAD - 2.8 - WIDER BY NEARLY A POINT FROM LAST WEEK
  • EARNINGS SEASON DRIVING MORE VOLUME IN MICRO EMINI FUTURES

 

FUTURES OPTIONS FEEDBACK 

  • QUESTION FROM SHUTDL: Nick still scalping his gold gamma?
  • QUESTION FROM crypto messi: Is WTI SKEW usefull for directional trading?
  • COMMENT FROM @trader1906 - It won't give you buy sell signals, I have modeled some skew bends that let you know moves are over done similar to the gold one I published but no holy grail.
  • QUESTION FROM AZERAFEL: What is the best commodity market for options traders right now. Best mix of volume, volatility and liquidity? When is Nick coming back on the show?
  • QUESTION FROM DAZZNE: Can you explain how the fedwatch tool actually works?


 

 

Jul 19, 2019

TWIFO 160: All The Research You Could Ever Need
HOST: MARK LONGO, OPTIONS INSIDER MEDIA GROUP
CME HOTSEAT GUEST: ERIK NORLAND - EXECUTIVE DIRECTOR AND SENIOR ECONOMIST, CME GROUP

FX

Brexit: Pound Set For Volatile Fall after Calm Summer?
Options traders see a calm summer but volatile fall for GBPUSD.
Implied volatility is far below 2016 levels.
Options skewness is negative, especially for this fall, but not exceptionally so.
A great deal of bad news has been priced into the pound.
SONIA futures have abandoned hopes for the BoE rate hike, now suggest a cut is more likely.

If U.S. Dollar Weakens, Who Benefits?
The U.S. dollar could weaken because of bigger deficits, lower rates and slower growth.
British pound may be undervalued because of Brexit and susceptible to a long-term rally.
It may be hard for central banks to further devalue Euro, Swiss franc and Yen.
Among emerging market currencies, the low-debt, not-commodity-dependent Indian rupee may be a winner.
The Renminbi might follow USD downward.
Iron ore and coal cast a dark cloud over the future of the Australian dollar.

CRUDE OIL

Oil: Three Signs of Prices Hitting Bottom - 6/19/19
Oil prices have fallen out of bed again, with WTI crude oil tumbling 24% between April 23 and June 5. Refined products experienced similar declines, with gasoline and ultra-low sulfur diesel off 21% and 18%, respectively, over the same period. Not even attacks on shipping through the Strait of Hormuz appear to be enough to spark a sustained rally in either crude oil or refined markets.
In April, when oil prices hit their high for the year, three factors gave warning signals that a decline was becoming more likely:
Soybean oil prices, often a leading indicator of crude, had been falling for months (Figure 1).
Out-of-the-money (OTM) crude oil options skewness became less negative than usual.
OTM options on refined products had achieved extreme positive skewness.

Oil: Are Options Skews Reliable Price Indicators?
21 May 2019 By Erik Norland Topics: Energy
Off The Charts! examines the pertinent economic issues of the day, providing a deeper dive into complex topics and framing the issues in a way that can lead to a better understanding of the financial and commodities markets.

EQUITIES

RALLY TAKING A BIT OF A BREATHER TODAY
VIX 14.25 - UP 1.5 FROM LAST SHOW
VVIX: 86.5 - UNCHD FROM LAST SHOW
RVX: 16.40 - UP .4 PTS
VIX/RVX SPREAD - 2.15 - TIGHTER BY MORE THAN A POINT FROM LAST WEEK

Portfolios and Investing: If/When “Winter” is Coming?
The Fed may have overtightened monetary policy.
The economic cycle may be gradually turning towards a wintry downturn.
In past “winters,” equities have usually underperformed.
Short-term bonds could soar because of the Fed’s policies.
If the Fed doesn’t ease policy soon, brace for a surge in volatility.

Forces That Drive Equity Select Sectors
 

GOLD

Gold: Impact from U.S. and Chinese Policies
Gold has earned broadly similar returns for Chinese and U.S. investors since 2000.
The divergence in returns could grow as US and Chinese monetary policy part ways.
Growing Chinese debt and a rising U.S. budget deficit could be globally bullish for gold.
Fed rate cuts, if they happen, might also be bullish for gold.
If the Fed stands firm and does not cut rates, gold prices might suffer.


SOYBEANS

China, Brazil and the Soybean Crush
Chinese growth exerts a strong, positive correlation to soy oil.
Chinese growth has a weaker and even inverse relationship with soy meal prices.
Soy oil is typically about 2-2.5x more expensive than soy meal per pound.
Soy oil has a stronger influence on planting decisions than less valuable soy meal.
Soy oil moves in lockstep with the Brazilian real.
Soy meal has a much weaker relationship with Brazilian growth.

 

Jul 12, 2019

TWIFO 159: Pop-Tart Arbitrage And The Mysteries of the Options Liquidity Matrix.

Russell Rhoads, Director of Derivatives Research at Tabb Group,  joins us to break down the latest findings from his Options Liquidity Matrix. Mark and Russell also discuss:

- Is pop tart arbitrage the new frontier of trading?
- Why is WTI call skew so weak?
- What is going on with Gold volatility?
- How does the explosion of micro emini futures volume impact the broader equity market?
- What the heck is going on in the crypto markets?
- And much more...

Futures Options Feedback

  • QUESTION FROM ANTHONY: Are we in a new volatility regime for gold?
  • QUESTION FROM CLDD: How do I read this Fedwatch tool?
  • QUESTION FROM 787WEST: I like the movers and shakers but you only do them for futures. Is there a futures options movers and shakers report as well?
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