tastylive: Options Jive

In today's episode of *Engineering the Trade*, host Jermal Chandler and guest Gus Downing discussed their market positions amid a market pullback, emphasizing long Delta exposure and their strategies for managing risk. Both noted that instead of hedging, reducing long positions can be more effective. They highlighted the psychological benefits of having some green trades amid losses. The conversation also touched on VIX trends and potential market movements as they anticipate a bounce back, with a focus on confirming a market bottom before further positioning.

A 10-year market study reveals significant differences in price volatility between ETFs and individual stocks. ETFs like SPY, IWM, QQQ and DIA experience outlier moves (defined as twice the daily expected move) only 1.6-2.3% of the time, with SPY going up to 567 days without a significant outlier. In contrast, individual stocks like Tesla, AMD, Palantir and Lululemon saw 81% more outlier events and spent 42% fewer days in calm periods compared to ETFs. Western Digital (WDC) showed the shortest period without outlier moves. The data supports selling premium on ETFs during low volatility periods, while individual stocks may offer better opportunities when implied volatility is high. This explains the current popularity of 0DTE SPX trading strategies among premium sellers.

Hosts Liz and Jenny conducted an entertaining Fast Market session starting with an ARCAT diagonal spread discussion that evolved from confusion over break-even targets below current stock price. The standout trades included adjusting their existing ETHA zebra position by adding a 26-43 strangle (despite Jenny's reluctance about calls against zebras), a KVUE 19-23 call spread for just 44 cents representing a potential "10-bagger," and an Apple $10-wide diagonal targeting 265 strike based on viewer Sina's bullish call. The session highlighted important lessons about account sizing when the hosts modified a viewer's preferred SPX $25-wide iron condor (collecting $5) to a $10-wide version (collecting $2.30) because the $2,000 risk represented too large a percentage of their account balance. Personal moments included Jenny sharing her Buxom Celeste lip gloss brand and Liz reminiscing about teaching options to Bob from Pepsi who had concentrated stock positions when it traded at $80 (now $150).

AMD surged with a six-standard deviation move following its OpenAI deal, prompting traders to enter strangles after the initial price jump. Meanwhile, multiple asset classes are making historic moves simultaneously, with the S&P 500 and NASDAQ hitting all-time highs. Gold touched $4,000 and silver reached $50, both up for eight consecutive weeks. Bitcoin also reached record highs, while the U.S. dollar experienced its biggest surge since November 2023, pressuring global currencies including the euro and yen. Rare earth metals stocks like MP, LAC, and TMQ have gained momentum as the U.S. government takes stakes to counter China's dominance in the sector. Jamal noted he's using put diagonals in SPY and SMH for portfolio protection, though bearish positions have generally been "donations to the options gods" in this relentless bull market.

A ceasefire in Gaza seemed key as gold and crude oil prices sank, but why did stocks fall too? Is the US dollar really to blame? tastylive's Head of Global Macro Ilya Spivak breaks down what happened as stocks and gold prices recoiled from record highs together, and previews what's ahead when US consumer confidence data hits the wires.

Analyzing the market's puzzling reaction to Israel-Hamas ceasefire developments where oil and gold fell while the dollar strengthened amid broader market weakness. We explore why tech stocks showed resilience while energy stocks fell. Plus, insights on Amazon's potential undervaluation and trading strategies during geopolitical shifts.

Rare earth metals and minerals stocks moved higher as China appears to be limiting supply. MP Materials, LAC, and TMQ all showed early gains before pulling back. China dominates rare earth production, critical components for electronics manufacturing. Costco jumped on strong monthly sales data, with digital demand driving growth. The retailer's positive performance comes despite broader consumer spending concerns, suggesting potential for further stock appreciation. DoorDash announced a partnership with sidewalk robot developer Servrobotics for deliveries in Los Angeles, signaling expansion of automation in the delivery sector. The dollar strengthened in a four-day rally, approaching par ($100) on the DXY index, pressuring currencies, gold, stocks, and oil.

In this educational session of From Theory to Practice, Jim Schultz breaks down undefined risk strategies like short puts, short strangles, ratio spreads, and jade lizards. While these approaches offer superior probabilities and easier adjustments compared to defined risk strategies, they come with the significant tradeoff of unlimited risk exposure and greater complexity.

In today's session, traders analyzed market movements as equities faced selling pressure with the S&P 500 down 20 points and NASDAQ down 65. Despite the red day, volatility remained relatively contained with VIX only up 40 cents, still under 17. Mike presented a Google diagonal spread, betting on a pre-earnings rally with a December call and October 31st short option for a $760 debit. Jermal highlighted Ethereum's underperformance versus Bitcoin with a bullish ZEBRA trade costing $576, while another trader demonstrated a similar diagonal spread approach for $441. Katie discussed natural gas seasonality with a synthetic jade lizard/dynamic width iron condor collecting $510, eliminating upside risk while maintaining downside protection ahead of winter months. The team noted gold's significant selloff, creating potential trading opportunities, while discussing correlation risks if multiple asset classes continue declining simultaneously. They emphasized monitoring VIX and volatility futures curves as key indicators for determining market direction rather than reacting to minor pullbacks.

In today's market session, focus shifted to currency movements, particularly the Japanese yen. After a recent three-day uptrend in USDJPY followed by a 10-day decline, the pair has skyrocketed 4% this week following comments from Japan's incoming prime minister. The U.S. dollar narrative remains strong despite the government shutdown, which historically has negative but temporary effects on the currency. While markets are pricing an October 15 resolution at minimum, Glenn noted longer shutdowns typically have more significant market impacts. Traders discussed whether to continue riding the yen trend or consider alternative currency pairs like euro-yen or pound-yen. The euro-yen pair reached unprecedented levels since the euro's 1999 inception, potentially creating fade opportunities. The hosts executed a small euro-yen short position with a take-profit order at 175, aiming to capitalize on potential mean reversion while respecting the established range in this historically extended market.