Getting Over Trader’s Block
Apr 21, 2021
By: Frank Kaberna
At the time of writing (9am CT 4/15), all Small Exchange futures are well within their weekly range as forecasted by volatility. Most markets are safely between year-to-date extremes, and the VIX index is at its lowest level since news of the pandemic initially felled equities back in February 2020.
With all of that said, last week was one of the year’s best for active futures traders.
If you’ve been exclusively looking at the outright markets, then you’ve most likely been met with sideways, frustrating trades. However, amid that sideways action, relationships among the outrights continue to twist and turn. Trading the difference between two markets has in some cases yielded more opportunity than the individual markets themselves.
The relationship between two correlated markets can be viewed as a rubber band. Their difference expands and contracts with some regularity relative to how strong the band is. Very highly correlated relationships, like Small Technology to Nasdaq, only deviate slightly, while the weaker ones, like Small Technology to Small 10YR Yield, witness greater divergences.
Small Technology \ Relationship Standard Deviations
Source: dxFeed Index Services (https://indexit.dxfeed.com)
One way you could access these relationship trades would be by buying the underperformer and selling the outperformer, if you think the rubber band will hold. But the band does break every once in a while, so realistic expectations and firm mechanics could prove helpful.
Finding inspiration in low volatility can seem tough, but seemingly sideways markets can lead to some of the best opportunities for active traders.
Follow us on Twitter: https://twitter.com/small_exchange
Subscribe to our YouTube Channel: https://www.youtube.com/channel/UC5pAsul3H_7FYuPmZscClrA
Save Every Time You Trade the Smalls
The Small Exchange has also created a limited number of subscriptions for a one-time payment of $100 that give traders a lifetime of reduced exchange and market data fees when trading the Smalls.
For more information on the Small Exchange’s products and subscription service, visit smallexchange.com. And be sure to check out my new show on tastytrade, Small Stakes, where Pete Mulmat and I will show viewers how to navigate Small Exchange products every Monday-Friday and always on demand.
© 2021 Small Exchange, Inc. All rights reserved. Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information in this advertisement is current as of the date noted, is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading futures involves the risk of loss, including the possibility of loss greater than your initial investment.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on tastyworks.com.
tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”). tastytrade is a trademark/servicemark owned by tastytrade.
Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on quietfoundation.com is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.
Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information on this site should be considered general information and not in any case as a recommendation or advice concerning investment decisions. The reader itself is responsible for the risks associated with an investment decision based on the information stated in this material in light of his or her specific circumstances. The information on this website is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading in derivatives and other financial instruments involves risk, please read the Risk Disclosure Statement for Futures and Options. tastytrade is an investor in Small Exchange, Inc.