Tech runs together

How to trade low volatility with sector index $XLK

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Setting the Table:

• Another summer day, another sell off bought. Major indices were down over a one percent yesterday at lunch, and SPX rallied back 30+ points to close down only 40 basis points. The 4500 strike has a lot of psychological magnetism  - for round number lovers, it’s not just an increment of 100, but 500 also. However most of this short term intra day action is going to be driven by marginal flows. 

• Options markets were sleepy yesterday though vol retained a bid with the selloff. This had the effect of actually flattening the most extreme points of skew, though yesterday the rising vol and near the money skew would have an an impact on anyone looking to collar their position. 

  

• New listings are always an interesting market opportunity. The two big exchange operators are in a constant battle for these lucrative offerings, as they often drive revenue more than transaction fees (but not as much as market data.) Most recently, Nasdaq has listed Instacart and Arm, while NYSE grabbed Birkenstock. 

  • When will options come? There’s a five day waiting period assuming all the other criteria (average daily volume, shareholder count, etc.) are met. For top tier names like these, expect early and heavy trading. It won’t be until the next quarterly rebalance that they’re eligible for penny decrements, but weekly expirations are at the discretion of exchanges if volume warrants it.