Sunday, November 23, 2014

Exchange Traded Note (ETN) list with Net Asset Value Premium & Discount

I was searching the internet for an ETN list in Excel format with the premium and discount percent and I couldn't find it, so I made one myself. This is not a complete list and I will not be updating it.The values are only current as of 11/21/14.

Here is a public link to it on Google Documents- ETN List 

Here is a partial list of the Top 10 ETN's trading at a Discount-

Symbol NAV Symbol Name Price NAV Price Premium/Discount % Avg Volume
TVIX  ^TVIX-IV Credit Suisse AG 2.42 7.273 -66.73 25590500
USLV  ^USLV-IV Credit Suisse AG 23.53 49.382 -52.35 296731
VIIX  ^VIIX-IV Credit Suisse AG 37.72 60.059 -37.20 63511
TVIZ  ^TVIZ-IV Credit Suisse AG 20.48 32.419 -36.83 5317
UGLD  ^UGLD-IV Credit Suisse AG 11.94 17.249 -30.78 180122
VIIZ  ^VIIZ-IV Credit Suisse AG 17.25 21.342 -19.17 1600
ROLA  ^ROLA-IV iPath Long Extend 148 177.451 -16.60 0
INR  ^INR-IV Market Vectors In 34.8301 37.387 -6.84 852
SZO  ^SZO-IV PowerShares DB Cr 43.8 45.84 -4.45 2325

Friday, October 10, 2014

Crude Oil Volatility Index Spike


Chart of the OVX; Crude Oil Volatility Index.

Monday, October 06, 2014

Implied Volatility and BioPharm failures; ADHD & SNSS

The two stocks with the highest option implied volatility trading this year released results today. The 2 Stocks were; ADHD and SNSS, two biopharma stocks that had implied volatility over 300% and in the days leading to the announcement of their phase III results implied vol spiked to over 500%.

Today the results came out and both companies disappointed. Both stocks gapped lower. ADHD is down aronud 54% at $6.42 currently and SNSS is down 76% at $1.60 currently. If you happened to listen to the conference call of ADHD this moring, Piper Jaffray was the first to ask questions and they first congratulated the company on the results and came out later saying that they reiterate a buy with a target of $42. This can be very confusing for investors to hear, but the price of the stock doesn't lie. Quote from Piper Jaffray from

The days leading up to the announcement ADHD stock was zig zagging up and down 15% a day. The stock was a big gamble, with around a 6 million share float, it was poised for a large move on the news release. I don't know who in the world would be buying or shorting shares ahead of the news release.

The real money to be made was in the options. The OTM $40 calls on ADHD were trading at over $1 the previous trading day and now they will expire worthless, The stock would have had to spike around 300% in order for you to take any heat on the trade. Meanwhile the $5 puts were trading over $0.50 the previous day and now are going for around $0.20. The ideal trade on this stock was selling the strangle ($5 puts and $40 calls).

Something to note leading up to the press release was the short sale ban imposed by some brokers (ie. Interactive Brokers) and the price drop leading up the final days before the news release. One can speculate that the only person that would short a stock with pending phase III  results was doing so with knowledge of what the outcome was. Here are some charts and numbers.

The option chain the day prior to the release of news for ADHD -

The option chain the day of the release of news for ADHD

If you thought you could sell the OTM calls at the open, you couldn't, the market makers aren't that dumb. The OTM calls all opened with 0 bid and 0.05 offer.

As the day progresses, the available short shares available at IB shrinks along with the stock price.

ADHD Borrow rates leading up to the news release.

Short Strangle ($5 puts and $40 calls) chart-

Monday, September 22, 2014

Triple & Quadruple witching and the next Monday Trading Statistics

I noticed a pattern on Monday's following Triple/Quad witching Fridays where ES drops. It turns out there is a statistical edge in going short on witching days and holding to Monday close. Here is a link to the study and chart from the study.

Thursday, August 28, 2014

St. Petersburg paradox

From Wikipedia
"A casino offers a game of chance for a single player in which a fair coin is tossed at each stage. The pot starts at 2 dollars and is doubled every time a head appears. The first time a tail appears, the game ends and the player wins whatever is in the pot. Thus the player wins 2 dollars if a tail appears on the first toss, 4 dollars if a head appears on the first toss and a tail on the second, 8 dollars if a head appears on the first two tosses and a tail on the third, 16 dollars if a head appears on the first three tosses and a tail on the fourth, and so on. In short, the player wins 2k dollars, where k equals number of tosses. What would be a fair price to pay the casino for entering the game?
To answer this, we need to consider what would be the average payout: with probability 1/2, the player wins 2 dollars; with probability 1/4 the player wins 4 dollars; with probability 1/8 the player wins 8 dollars, and so on. The expected value is thus
E= \frac{1}{2}\cdot 2+\frac{1}{4}\cdot 4 + \frac{1}{8}\cdot 8 + \frac{1}{16}\cdot 16 + \cdots
= 1 + 1 + 1 + 1 + \cdots
=\infty \,.
Assuming the game can continue as long as the coin toss results in heads and in particular that the casino has unlimited resources, this sum grows without bound and so the expected win for repeated play is an infinite amount of money. Considering nothing but the expected value of the net change in one's monetary wealth, one should therefore play the game at any price if offered the opportunity. Yet, in published descriptions of the game, many people expressed disbelief in the result. Martin quotes Ian Hacking as saying "few of us would pay even $25 to enter such a game" and says most commentators would agree.[2] The paradox is the discrepancy between what people seem willing to pay to enter the game and the infinite expected value."

Wednesday, May 07, 2014

Explaining Volatility and Levered Drag

Tastytrade had a great video explaining the difference between making bullish bets on  VIX, VXX, and UVXY when the VIX index is below 15. To summarize, the 2x leveraged ETF UVXY performed poorly for the long volatility strategy compared to the index and VXX and it was mainly due to volatility drag or more simply, negative compounding due to high volatility over a period of time.


Sunday, April 13, 2014

Think or Swim ThinkBack error for stock splits

While backtesting some option strategies in TOS I noticed a problem with the thinkback tool. When a stock price splits / reverse splits, the option prices don't reflect the stock price split. Instead the options are now priced to the new stock price without adjusting for the split. ThinkorSwim is working on resolving the bug.

Example- BIB had a 2:1 stock split 1/24/14.

 BIB 90 strike CALL 1/23/14 = 94.80.


 BIB 90 strike CALL 1/24/14 = 3.80


Sunday, March 23, 2014

Penny Stock Pump and Dumps

I'm sure many people have recently seen the movie "Wolf on Wall Street" and wondered how people could get peddled into buying such crappy companies back in the 1980's and 90's. Surely this wouldn't happen again in today's time with all of the information freely available by doing a quick search on Google. Well, these pump and dumps scams still continue to happen everyday, and I'm shocked at the most recent story concerning one of the biggest pump and dump promoters to date; John Babikian.
There are numerous articles (1 , 2, 3 ) telling the story of how he used his website to pump and dump penny stocks, and all the while make millions in the process. It just makes me sick to think that people still fall for this stuff everyday. There is a website detailing most of the penny stocks that the promoter pumped at awesomepennyscams. Please do your research before ever trading any of these stocks. I myself keep hearing about how people are becoming millionaires trading these penny stocks, but I guarantee you there are far more people losing than making money trading these OTC stocks. Trading is a very had business to be in and penny stocks are the riskiest of all the types of stocks you can trade. Do not believe the hype or believe that it's easy to become a millionaire trading these stocks.

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