Options Trading News

December 25, 2012  Tue 7:18 AM CT

People listen when David Tepper talks, and last week was no exception when he was interviewed on CNBC.

The founder of Appaloosa Management was widely quoted for his bullish remarks about the stock market's prospects last Monday even in the face of fiscal-cliff uncertainties. But some of Tepper's most interesting remarks involved his use of options.

David TepperTepper discussed how he looks at volatility levels as a tell both for when to buy and what kind of options to purchase. He discussed the use of "skew," though he didn't use that terminology.

Yet I do have to take issue with some of his assessments. For instance, he talked about how high CBOE SKEW Index was, when it was actually near its lows at the time. Tepper also said he thinks that the possible downside is around 2 percent to 3 percent if we go off the fiscal cliff, while I believe that the potential drop is multiples of that.

But the former is a matter of data and the latter of opinion. What I find most interesting is how extensively he is using option strategies and volatility data.

Appaloosa is a $16 billion hedge fund that has seen returns of around 25 percent for the year. Its focus on options is an indication of their importance to insitutional markets. Combined with IntercontinentalExchange's purchase of NYSE Euronext on Thursday--a deal widely viewed as driven by the derivatives business, not stocks--interviews like Tepper's highlight the fact that options are increasingly the go-to market. 

(Screen shot courtesy of CNBC.)
Share this article with your friends

Related Stories


Video: VIX call buyers loading up

November 30, 2015

Group One's Jamie Tyrrell says volatility traders are buying 15,000 VIX December 20 calls and 30,000 January 30 calls today.


Video: VIX traders sell premium

November 25, 2015

As activity slows the day before Thanksgiving, Group One's Jamie Tyrrell says traders are selling December 21 calls.


Video: Big call spreads in the VIX

November 24, 2015

After the VIX Weekly contracts settled at 16.56 this morning, Group One's Jamie Tyrrell says today's big trades are December and February call spreads.


Video: Complex January call play

November 23, 2015

As volume slows this Thanksgiving week, Group One's Jamie Tyrrel says the largest trade today is buying the January 19 calls and selling the January 24 and 26 calls.


Video: Will VIX hold at 16 level?

November 20, 2015

The spot volatility index is dropping below 16 today, but Group One's Jamie Tyrrell says one large put seller does not expect the VIX to go much lower.



The fastest money in the market
View full report »

Premium Services

Education & Strategy

The art of trading

As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

View more education articles »