There Has Never Been A Better Time To Be Trading Stock Options

Like in 2008 when the VIX was oft mentioned as it soared higher on a daily basis in 2014 the VIX is again in the headlines, but for the opposite reason.  In 2008 the dreaded "fear index" revealed a market place choc full of volatility, one Turbo Tax Tim Gietner brain fart  from an all out crash.  Today the "fear index" has turned into the "we don't give a shit index".  We don't give a shit about war, famine, debt, government shutdowns, chemical attacks, growth, jobs, revenue, insider trading, sequesters, banks taking 20% of our savings, debt ratings..... as long as the 1% is making 20% who gives a shit.

The VIX is getting clubbed lower every day, with a seemingly nasty beat down coming as the trading session ends.  It's one thing to see this happen for a few days, weeks, or months... but its been going on for years. Almost two years ago to the day, I penned a piece about the VIX and its relation to the market.

Five years!  It's been five years and finally.... finally... I am starting to see the capitulation from the one or two bears left in the market.  You may hate this market, but don't say you weren't warned.  Ben Bernanke told the world he wanted everyone in risky assets, those trading the other way have paid dearly.  While they will bitch and moan about the FED, they have no one to blame but themselves.  With the train loading up with bulls again, is this market at a top?  I think we'll know when the top was after the fact.... and I don't want to be one of those top callers.  But I will share my thoughts later this weekend.

With the VIX getting crushed to extremes, and the market posting small measured moves, the price of stock options have plummeted as well.  If you've been trading stock options for a while, it's like going to the Supermarket and seeing chop meat selling for $1.50 a pound less than it was 3 years ago.  It's cheaper than ever to trade this market via stock options.

Barron's had a great piece about this phenomena this past week.

The article was written mid-week before the VIX tumbled to fresh lows:

In the recorded history of options, there has rarely been a better time than now to buy them.

The stock market's grinding advance to record highs has pushed implied volatility to near record lows. The closely watched CBOE Volatility Index is around 11.50, far below its long-term average of about 19.

The past few weeks we have seen some giant returns buying calls in higher priced stocks , namely PCLN, GOOGL, AMZN, and GMCR.  In the chat room on Friday one trader netted over $80k buying out of the money calls in the early afternoon.  Earlier in the week I was a buyer of the $AMZN $317.50 calls for $.21.  Those hit $13 on Friday.  That is a monetary move of $210 into $13,000.  Two weeks ago a text was sent to subscribers noting the low price of GOOGL calls.  GOOGL rallied and those calls went from $.65 to over $7.00.  On option expiration I private tweeted a risky trade I made at $.35 for $PCLN calls.  Those calls closed with a value of over $5.00.

Over the last five years stock options have come a long way.  Their prices have dropped as volatility has dropped.  As the market moved from $.05 increments to penny pricing retail traders are getting better entries.  There are weekly stock options, mini options, the market has grown tremendously. There is no better time to be trading stock options and I expect traders and investors to continue to move from buying stock to buying options instead.  These days even the great Carl Icahn utilizes stock options when he takes positions in companies.

The music will stop at some point.  Stocks will drop, the VIX will rise, and the price of chop meat will rally $2 a pound.  But for now we are dancing,   putting all the meat we can fit in the freezer, and enjoying inexpensive options.

See first hand how we trade stock options in our chat room at  High prices, low prices --->>  stock options rock.  Just be aware no matter how cheap option prices get, just as easily as you can make a profit trading options, you can also lose your entire investment in a blink of an eye.


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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