Options Market Outlook

Waverly Advisors

Adam Grimes, Andrew Barber

Research

10 Pages

Waverly Advisors examines the technical, macroeconomic, and options market backdrop following the Federal Reserve’s surprise decision not to begin tapering. The paper argues equities remain in a bullish trend despite near term volatility, while identifying Europe as a stronger performer than U.S. stocks and warning that precious metals face renewed downside.

Key Takeaways

Europe Leads Markets: European equities gained 17.8% from the June 24, 2013 low versus 8.7% for the S&P 500 and 12.8% for the Russell 2000.
Selective Volatility Opportunities: The paper notes the VIX remains within recent historical ranges while recommending limited risk option structures instead of broad long volatility positions.
Gold Weakness Expected: The suggested GLD 120/110 December put spread risks about $143 per spread while offering a maximum gain of roughly $857 if GLD finishes at or below $110.
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