An option has convexity because the relationship between the price of the underlying asset and the value of the option is not linear.
We actively monitor several investor sentiment gauges that indicate how optimistic or pessimistic investors are about the stock market. One of the sentiment indicators we monitor is the Citigroup Panic/Euphoria Model. When it reaches an extreme, I comment on it here.
The Cboe Implied VIX Index is a measure of expected future "implied" volatility. The Cboe® Realized Volatility Index is designed to indicate the magnitude of actual realized daily price movements by measuring the annualized standard deviation in the daily price return of an underlying over a specific period.
A position with asymmetric risk/reward is one in which the possible profit is larger than the potential loss, or the size of the expected gain is greater than the magnitude of the loss.
I pointed out in Downtrend but Statistically Oversold Short-Term as Gold Turns Up the US Dollar had reached a statistically oversold level, setting up a high probability for a countrend.
According to Citi, the panic/euphoria model is a gauge of investor sentiment. It identifies "Panic" and "Euphoria" levels which are statistically driven buy and sell signals for the broader market.
Sector trends offer dispersion: over the last 10 years, the average difference between the best-performing and worst-performing sectors has been 45% per year.
The FOMC raised rates by 25 basis points but gave no indication of its intentions for the September meeting. Powell stated that the FOMC has not decided to hike rates every other meeting and will instead take it meeting by meeting.
S&P GSCI® Goldman Sachs Commodity Index is a composite index of commodity sector returns representing an unleveraged, long-only investment in commodity futures broadly diversified across the spectrum of commodities.
While most investment managers using fundamental earnings growth and valuation like this for decision making. we primarily focus on the price trend direction, relative strength, momentum, and volatility to determine when to buy or sell, but we still monitor these fundamental metrics.
The MOVE index (Merrill Lynch Options Volatility Estimate) is a market-implied measure of bond volatility similar to the CBOE Volatility Index ($VIX) for stocks. Some consider it fear in the bond market, as in uncertainty about interest rates.
The Chicago Board Options Exchange Gold ETF Volatility Index (GVZ) measures the market's expectation of 30-day volatility implicit in the prices of near-term Gold ETF options. SPDR GLD ETF, the largest physically backed gold ETF in the world, is sponsored by World Gold Trust Services and listed since 2004.
The Philly Fed survey is a measure of regional manufacturing growth, also known as the "Manufacturing Business Outlook Survey". When the index is above zero, it indicates factory-sector growth, and when below zero, it indicates contraction. In global macro, a rising Philly Fed survey is considered a signal that a bull market is on the horizon.
Goldman Sachs has lowered its probability for a US recessions further, giving just a 20% chance of recession.
How global capital markets interact with each other is one of the most useful parts of global macro. US Dollar is in a downtrend but statistically oversold short-term.
Probabilistically, what's most likely to happen next is inertia; staying the same. The second highest is continuing the recent trend. The third is to reverse into a countertrend.
Macro is top of mind in market phases like this, when the Federal Reserve FOMC has been raising interest rates in response evolving macroeconomic data to tame inflation.
Macroeconomics is a branch of economics that deals with the performance, structure, behavior, and decision-making of an economy as a whole, so we monitor macro indicators.
Americans celebrate Independence Day on July 4th to commemorate the adoption of the Declaration of Independence on July 4, 1776. This historic document was a formal statement by the American colonies announcing their separation from Great Britain and their intention to establish a new nation, the United States of America.
In the U.S. Sector Trend Following Matrix we highlight the percentage of stocks above their 5, 20, 50, 100, 150, and 200 day moving averages of the S&P 500 index and a breakdown of each of its sectors.