Crash In DOW Opens Door for Volatility Sellers in Commodities
Good afternoon. This is James Cordier of OptionSellers.com with a market update for February 17th. Well, we look back and we see the Brexit about a year and a half ago. A little over a year ago, we had the surprise results in the U.S. election and now in 2018 in February we had a 3000-point move in the Dow Jones Industrial Average. And of course these three things all have in common is a great influx of volatility into the market. Basically, setting up very large premiums in both puts and calls in stocks and in commodities. While we’re positioned and looking at positions while the volatility index rises like that is not always the most fun, but we are looking at underlining futures prices in crude oil, and in silver, and in gold, and primarily they’re quite close to where they were as the stock market crash began. Of course now the stock market is coming back. It wouldn’t surprise us over the next two to three weeks to see them testing their recent highs yet again. And then we see the volatility index probably inching down. We do like the fact that volatility hit at the beginning of the year. It will likely come as we go into the second, third, and fourth quarter and at that point we should be able to make hay as the options then come back in and we position ourselves at this time. As so many clients refer to our cash position over the last six months, ‘why are we margined at twenty-five percent?’ Well, volatility was low and now you have your answer. We’re looking at putting premiums back into accounts. We’re looking at putting more margin facilities into use and we do like the idea of selling options now that volatility is extremely high. We’re looking at the second and third quarter of this year as likely decays in a lot of the options that we’re holding and look for new adventures such as natural gas. That market has traded absolutely perfectly seasonally the last eighteen months and we expect it to do the same thing again the remainder of the year.
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