Market Trend1 Volatility2 Skew3 Correlation4 Tradesoptionworks.com › demo ›...

Quant Research on Futures Options

Daily Strategy Report Based on Closing Prices for January 23, 2014

MarketFutures Options

S&P 500 p.3 45 Flat 85 Rich 13 Puts -0.75 Wait Short Condor

10-Yr Notes p.4 76 Bull 27 Cheap 93 Calls! -0.51 Buy Long Call

Gold p.5 89 Bull! 43 Fair 57 Even -0.63 Buy! Short Put Spread

Silver p.6 66 Bull 77 Rich 85 Calls -0.60 Buy Short Put Spread

Crude Oil p.7 30 Bear 42 Fair 81 Calls -0.78 Sell Long Put Spread

Natural Gas p.8 35 Bear 71 Rich 95 Calls! +0.68 Sell Short Call Spread

Euro FX p.9 53 Flat 44 Fair 61 Calls -0.30 Wait Long Condor

Br Pound p.10 84 Bull! 93 Rich! 93 Calls! -0.31 Buy! Short Put Spread

Corn p.11 45 Flat 19 Cheap 20 Puts -0.64 Wait Long Strangle

Soybeans p.12 17 Bear! 31 Cheap 5 Puts! -0.51 Sell! Long Put Spread

1Trend (owTI): OptionWorks

® Trend Indicator ranges from 0 to 100. Readings below 40 indicate the underlying market is bearish; above 60 the market is bullish.

2Volatility (owVI): OptionWorks

® Volatility Indicator ranges from 0 to 100. Readings below 40 indicate options are undervalued; above 60 options are overvalued.

3Skew (owSI): OptionWorks

® Skew Indicator ranges from 0 to 100. Readings below 40 indicate puts are more expensive that calls; above 60 calls are more expensive.

4Correlation (owTI vs. owVI): R

2 correlation coefficient ranges from -1 to +1. Negative readings indicate volatility rises when the market falls; positive the opposite.

OptionWorks® (www.OptionWorks.com) research products are produced by The Applied Research Company (www.AppliedResearch.Com), a Commodity Trading Advisor registered with the National Futures Association.This report is not a solicitation to buy or sell any financial instrument. The information is believed to be from reliable sources, but no guarantee can be made as to its accuracy or completeness. Results may vary. Past performanceis not necessarily indicative of future results. Futures and options trading involves risk. Recognize that you must carefully consider whether such trading is suitable for you in light of your circumstances and finaincial resources.© 2014 The Applied Research Company. All Rights Reserved. Duplication or distribution without permission is strictly prohibited and is a violation of United States copyright law. NFA # 0192833

Best Trade Today

TradesowTI owTI vs. owVI

Trend1

Volatility2

Skew3

Correlation4

owSIowVI


Trading Strategies Based on Closing Prices for January 23, 2014 of 14

Trend

owTI1

ticks $ ticks $ owVI2

owSI3

Buy Sell Buy Sell ticks $ ticks $ ticks $

CME E-mini S&P 500 Index ($50 x index)

ESH4 1824.20 45 Wait H4 85 13 Short Condor 1725 1775 1915 1865 (17.25) (863) 7.00 350 9.25 463

CBoT 10-Year U. S. Treasury Notes ($1,000 per point)

TYM4 123'05.5 76 Buy '12.5 391 '22.0 688 J4 27 93 Long Call 125.00 '21 328 '12 188 '22 344

COMEX Gold (100 troy ounces)

GCJ4 1262.5 89 Buy! 13.6 1,360 24.2 2,420 J4 43 57 Short Put Spread 1145 1225 (10.4) (1,040) 6.0 600 7.6 760

COMEX Silver (5,000 troy ounces)

SIK4 20.047 66 Buy .348 1,740 .622 3,110 J4 77 85 Short Put Spread 17.00 19.00 (.301) (1,505) .158 790 .226 1,130

NYMEX Light Sweet Crude Oil (WTI) (1,000 barrels)

CLJ4 96.76 30 Sell .97 970 1.73 1,730 J4 42 81 Long Put Spread 94.5 89.5 1.22 1,220 .40 400 .74 740

NYMEX Henry Hub Natural Gas (10,000 mmBtu)

NGJ4 4.290 35 Sell .082 820 .146 1,460 J4 71 95 Short Call Spread 5.75 4.75 (.082) (820) .025 250 .055 550

CME Euro FX (125,000 EUR)

ECH4 1.3696 53 Wait H4 44 61 Long Condor 1.360 1.340 1.380 1.400 .01105 1,381 .00190 238 .00170 213

CME British Pound (62,5000 GBP)

BPH4 1.6624 84 Buy! .0059 369 .0105 656 H4 93 93 Short Put Spread 1.61 1.64 (.0044) (275) .0020 125 .0039 244

CBoT Corn (5,000 bushels)

CK4 435'2 45 Wait J4 19 20 Long Strangle 425 445 14'5 731 2'2 113 3'4 175

CBoT Soybeans (5,000 bushels)

SK4 1262'5 17 Sell! 11'2 563 20'1 1,006 J4 31 5 Long Put Spread 1240 1180 15'3 769 5'2 263 10'0 500

1owTI: OptionWorks

® Trend Indicator ranges from 0 to 100. Readings below 40 indicate the underlying market is bearish; above 60 the market is bullish.

2owVI: OptionWorks

® Volatility Indicator ranges from 0 to 100. Readings below 40 indicate options are undervalued; above 60 options are overvalued.

3owSI: OptionWorks

® Skew Indicator ranges from 0 to 100. Readings below 40 indicate puts are more expensive than calls; above 60 calls are more expensive.

4Trade: Market orders for futures trades ("!" indicates a strong signal). OB/OS indicates an overbought/oversold market. No futures trades at OB or OS levels.

5Risk: Liquidate when the trade loses this much or the owTI reverses to Buy/Sell, or (for options trades) when Days to Expiration falls to less than 15.

6Target: Liquidate when the trade profits this much or the owTI reverses to Buy/Sell, or (for option trades) when Days to Expiration falls to less than 15.

7: Strongest combination of trade indicators today.

8Entry Price: Limit ("or better") orders for option trades. Does not include commissions.


See complete trade liquidation guidelines on page 14.

Puts

7 Risk5

Target6

Futures Options

Exp Close Trade4 Risk

5Target

6

ExpVolatility

Option TradeEntry Price

8Calls



Trend

owTI1


owSI1


CME E-mini S&P 500 Index ($50 x index)

ESH4 1824.20 45 Wait H4 85 13 Short Condor 1725 1775 1915 1865 (17.25) (863) 7.00 350 9.25 463

1See footnotes on page 2.


Entry Price1

Risk1

Target1

Futures Options

Exp Close Trade1

Risk1

Target1

ExpVolatility

Option Trade 1

Puts Calls

1715

1745

1775

1805

1835

1824.25 ESH4 Futures

OptionWorks®

7.50%

9.00%

10.50%

12.00%

13.50%

N 13 27 D 11 25 J 9 23

11.89% ESH4 Volatility owHV AtM IV

OptionWorks®

Risk

Target

Current -35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

1620.0 1670.0 1720.0 1770.0 1820.0 1870.0 1920.0 1970.0 2020.0

ESH4 Futures

ESH4 Short Condor Profit & Loss +1915C/-1865C +1725P/-1775P 21-Mar 20-Feb 23-Jan

OptionWorks®

+10 +25 AtM -25 -10 -3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%

ESH4 Skew vs. Delta 1Y Average Current

OptionWorks®



Trend

owTI1


owSI1


CBoT 10-Year U. S. Treasury Notes ($1,000 per point)

TYM4 123'05.5 76 Buy '12.5 391 '22.0 688 J4 27 93 Long Call 125.00 '21 328 '12 188 '22 344



Target1

Futures Options

Exp Close Trade1

Risk1

Target1

ExpVolatility

Option Trade 1

Puts Calls Entry Price1

Risk1

120.75

121.5

122.25

123

123.75

123'05.5 TYM4 Futures

OptionWorks®

4.20%

4.50%

4.80%

5.10%

5.40%

18 J 15

5.08% TYJ4 Volatility owHV AtM IV

OptionWorks®

Risk

Target

Current -0.5

-0.25

0

0.25

0.5

0.75

1

1.25

1.5

1.75

121.50 122.13 122.75 123.38 124.00 124.63 125.25 125.88 126.50

TYM4 Futures

TYJ4 Long Call Profit & Loss +125.00C 22-Mar 21-Feb 23-Jan

OptionWorks®

+10 +25 AtM -25 -10 -0.60%

-0.40%

-0.20%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40% TYJ4 Skew vs. Delta 1Y Average Current

OptionWorks®



Trend

owTI1


owSI1


COMEX Gold (100 troy ounces)

GCJ4 1262.5 89 Buy! 13.6 1,360 24.2 2,420 J4 43 57 Short Put Spread 1145 1225 (10.4) (1,040) 6.0 600 7.6 760



Target1

Futures Options

Exp Close Trade1

Risk1

Target1

ExpVolatility

Option Trade 1


Risk1

1160

1200

1240

1280

1320

1360 1262.5 GCJ4 Futures

OptionWorks®

13.50%

15.50%

17.50%

19.50%

21.50%

23.50%

N 13 27 D 11 25 J 9 23

14.59% GCJ4 Volatility owHV AtM IV

OptionWorks®

Risk

Target

Current -75

-65

-55

-45

-35

-25

-15

-5

5

15

1120.0 1145.0 1170.0 1195.0 1220.0 1245.0 1270.0 1295.0 1320.0

GCJ4 Futures

GCJ4 Short Put Spread Profit & Loss +1145P/-1225P 27-Mar 23-Feb 23-Jan

OptionWorks®

+10 +25 AtM -25 -10 -1.50%

-0.50%

0.50%

1.50%

2.50%

3.50%

4.50%

5.50%

6.50% GCJ4 Skew vs. Delta 1Y Average Current

OptionWorks®



Trend

owTI1


owSI1


COMEX Silver (5,000 troy ounces)

SIK4 20.047 66 Buy .348 1,740 .622 3,110 J4 77 85 Short Put Spread 17.00 19.00 (.301) (1,505) .158 790 .226 1,130



Target1

Futures Options

Exp Close Trade1

Risk1

Target1

ExpVolatility

Option Trade 1


Risk1

18

19

20

21

22

23

24 20.047 SIK4 Futures

OptionWorks®

23.00%

25.50%

28.00%

30.50%

33.00%

35.50%

N 13 27 D 11 25 J 9 23

26.99% SIJ4 Volatility owHV AtM IV

OptionWorks®

Risk

Target

Current -1.8

-1.6

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

16.50 17.13 17.75 18.38 19.00 19.63 20.25 20.88 21.50

SIK4 Futures

SIJ4 Short Put Spread Profit & Loss +17.00P/-19.00P 27-Mar 23-Feb 23-Jan

OptionWorks®

+10 +25 AtM -25 -10 -1.50%

-0.50%

0.50%

1.50%

2.50%

3.50%

4.50%

5.50%

6.50%

7.50%

SIJ4 Skew vs. Delta 1Y Average Current

OptionWorks®



Trend

owTI1


owSI1


NYMEX Light Sweet Crude Oil (WTI) (1,000 barrels)

CLJ4 96.76 30 Sell .97 970 1.73 1,730 J4 42 81 Long Put Spread 94.5 89.5 1.22 1,220 .40 400 .74 740



Target1

Futures Options

Exp Close Trade1

Risk1

Target1

ExpVolatility

Option Trade 1


Risk1

90.5

92.5

94.5

96.5

98.5

100.5

96.76 CLJ4 Futures

OptionWorks®

13.00%

15.00%

17.00%

19.00%

21.00%

N 13 27 D 11 25 J 9 23

17.73% CLJ4 Volatility owHV AtM IV

OptionWorks®

Risk

Target

Current -1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

84.00 86.50 89.00 91.50 94.00 96.50 99.00 101.50 104.00

CLJ4 Futures

CLJ4 Long Put Spread Profit & Loss +94.5P/-89.5P 18-Mar 19-Feb 23-Jan

OptionWorks®

+10 +25 AtM -25 -10 -2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00% CLJ4 Skew vs. Delta 1Y Average Current

OptionWorks®



Trend

owTI1


owSI1


NYMEX Henry Hub Natural Gas (10,000 mmBtu)

NGJ4 4.290 35 Sell .082 820 .146 1,460 J4 71 95 Short Call Spread 5.75 4.75 (.082) (820) .025 250 .055 550



Target1

Futures Options

Exp Close Trade1

Risk1

Target1

ExpVolatility

Option Trade 1


Risk1

3.35

3.55

3.75

3.95

4.15

4.35

4.290 NGJ4 Futures

OptionWorks®

20.25%

23.50%

26.75%

30.00%

33.25%

N 13 27 D 11 25 J 9 23

36.21% NGJ4 Volatility owHV AtM IV

OptionWorks®

Risk

Target

Current -1.01

-0.9

-0.79

-0.68

-0.57

-0.46

-0.35

-0.24

-0.13

-0.02

0.09

3.7500 4.0625 4.3750 4.6875 5.0000 5.3125 5.6250 5.9375 6.2500

NGJ4 Futures

NGJ4 Short Call Spread Profit & Loss +5.75C/-4.75C 27-Mar 23-Feb 23-Jan

OptionWorks®

+10 +25 AtM -25 -10 -5.00%

-3.50%

-2.00%

-0.50%

1.00%

2.50%

4.00%

5.50%

7.00%

8.50%

10.00% NGJ4 Skew vs. Delta 1Y Average Current

OptionWorks®



Trend

owTI1


owSI1


CME Euro FX (125,000 EUR)

ECH4 1.3696 53 Wait H4 44 61 Long Condor 1.360 1.340 1.380 1.400 .01105 1,381 .00190 238 .00170 213



Target1

Futures Options

Exp Close Trade1

Risk1

Target1

ExpVolatility

Option Trade 1


Risk1

1.32

1.335

1.35

1.365

1.38

1.395 1.3696 ECH4 Futures

OptionWorks®

5.25%

6.00%

6.75%

7.50%

N 13 27 D 11 25 J 9 23

6.67% ECH4 Volatility owHV AtM IV

OptionWorks® Risk

Target

Current -0.01

-0.0075

-0.005

-0.0025

0

0.0025

0.005

0.0075

0.01

0.0125

1.3200 1.3325 1.3450 1.3575 1.3700 1.3825 1.3950 1.4075 1.4200

ECH4 Futures

ECH4 Long Condor Profit & Loss +1.380C/-1.400C +1.360P/-1.340P 8-Mar 14-Feb 23-Jan

OptionWorks®

+10 +25 AtM -25 -10 -0.50%

-0.25%

0.00%

0.25%

0.50%

0.75%

1.00%

1.25%

1.50% ECH4 Skew vs. Delta 1Y Average Current

OptionWorks®



Trend

owTI1


owSI1


CME British Pound (62,5000 GBP)

BPH4 1.6624 84 Buy! .0059 369 .0105 656 H4 93 93 Short Put Spread 1.61 1.64 (.0044) (275) .0020 125 .0039 244



Target1

Futures Options

Exp Close Trade1

Risk1

Target1

ExpVolatility

Option Trade 1


Risk1

1.575

1.595

1.615

1.635

1.655

1.6624 BPH4 Futures

OptionWorks®

5.25%

5.75%

6.25%

6.75%

7.25%

7.75%

N 13 27 D 11 25 J 9 23

6.71% BPH4 Volatility owHV AtM IV

OptionWorks®

Risk

Target

Current -0.0275

-0.025

-0.0225

-0.02

-0.0175

-0.015

-0.0125

-0.01

-0.0075

-0.005

-0.0025

0

0.0025

0.005

0.0075

1.5900 1.6025 1.6150 1.6275 1.6400 1.6525 1.6650 1.6775 1.6900

BPH4 Futures

BPH4 Short Put Spread Profit & Loss +1.61P/-1.64P 8-Mar 14-Feb 23-Jan

OptionWorks®

+10 +25 AtM -25 -10 -0.50%

-0.25%

0.00%

0.25%

0.50%

0.75%

1.00%

1.25%

1.50% BPH4 Skew vs. Delta 1Y Average Current

OptionWorks®



Trend

owTI1


owSI1


CBoT Corn (5,000 bushels)

CK4 435'2 45 Wait J4 19 20 Long Strangle 425 445 14'5 731 2'2 113 3'4 175



Target1

Futures Options

Exp Close Trade1

Risk1

Target1

ExpVolatility

Option Trade 1


Risk1

407.5

417.5

427.5

437.5

447.5

457.5

435'2 CK4 Futures

OptionWorks®

13.50%

15.50%

17.50%

19.50%

21.50%

23.50%

N 13 27 D 11 25 J 9 23

15.84% CJ4 Volatility owHV AtM IV

OptionWorks®

Risk

Target

Current -15

-12.5

-10

-7.5

-5

-2.5

0

2.5

5

7.5

10

12.5

410.0 416.3 422.5 428.8 435.0 441.3 447.5 453.8 460.0

CK4 Futures

CJ4 Long Strangle Profit & Loss +445C+425P 22-Mar 21-Feb 23-Jan

OptionWorks®

+10 +25 AtM -25 -10 -1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

CJ4 Skew vs. Delta 1Y Average Current

OptionWorks®



Trend

owTI1


owSI1


CBoT Soybeans (5,000 bushels)

SK4 1262'5 17 Sell! 11'2 563 20'1 1,006 J4 31 5 Long Put Spread 1240 1180 15'3 769 5'2 263 10'0 500



Target1

Futures Options

Exp Close Trade1

Risk1

Target1

ExpVolatility

Option Trade 1


Risk1

1210

1235

1260

1285

1310

1262'5 SK4 Futures

OptionWorks®

12.00%

13.50%

15.00%

16.50%

18.00%

N 13 27 D 11 25 J 9 23

15.01% SJ4 Volatility owHV AtM IV

OptionWorks®

Risk

Target

Current -20

-12.5

-5

2.5

10

17.5

25

32.5

40

47.5

1140.0 1165.0 1190.0 1215.0 1240.0 1265.0 1290.0 1315.0 1340.0

SK4 Futures

SJ4 Long Put Spread Profit & Loss +1240P/-1180P 22-Mar 21-Feb 23-Jan

OptionWorks®

+10 +25 AtM -25 -10 -1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00% SJ4 Skew vs. Delta 1Y Average Current

OptionWorks®




OptionWorks®

Skew Index

(owSI)

Calls!

Calls

Even

Puts

Puts!

Rich!

OptionWorks® Volatility Index (owVI)

0 10 20 30 40 50 60 70 80 90 100

Long Put

Long

Put

Spread

Long Put Spread

(owSI > 50)

or

Short Call Spread

(owSI < 50)

Short Call Spread

30

20

Sell!10

5OS

0Cheap! Cheap Fair Rich

Short

Butterfly

90

80

Buy

Op

tio

nW

ork

s® T

ren

d In

de

x (o

wTI

) 70

60

Wait50

40

Sell

Long

Straddle

Long

Strangle

Long

Butterfly

Long

Iron

Condor

Short Iron Condor

OptionWorks® Trade Engine100

OB95

Buy!

Long Call

Long

Call

Spread

Short Put Spread

(owSI > 50)

or

Long Call Spread

(owSI < 50)

Short Put SpreadTY

GC

SI

CL

NG

EC

BP

C

S

ES


Consider liquidating trades when …

1) the trade has lost an amount equal to Risk level at the time the trade was initiated, or

2) the trade has profited by an amount equal to Target level at the time the trade was initiated, or

3) the Trade column switches to Wait/Sell (for bullish trades) or Wait/Buy (for bearish trades), or

4) the Trade column switches to Wait (for neutral trades) or Buy/Sell, or

5) the Days to Expiration falls to less than 15 (for option trades)

OptionWorks® is a product of

The Applied Research Company53 West Jackson BoulevardSuite #337Chicago, IL 60604-3608 USA

[email protected]


Monadnock Building

OptionWorks®

Trade Liquidation Guidelines

http://www.appliedresearch.com/

mailto:[email protected]

http://www.monadnockbuilding.com/

Market Trend1 Volatility2 Skew3 Correlation4 Tradesoptionworks.com › demo ›...

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