Trader explains how he lost more than $15,000 in late January

Not everyone cheers calm markets. The S&P 500 traded within a narrow range of roughly 60 points in January, with low volatility to boot, but one trader says this market stability caused him a painful loss.

"I'm not going to sit here and sugarcoat anything: I'm down money this month. I didn't think I was going to be down; I had a nice first two weeks, I was up about $15,000 and I've lost that money because when I buy in options, I'm buying volatility, and I'm also paying time decay," Andrew Keene, CEO of AlphaShark.com, said Tuesday on CNBC's "Trading Nation."

"Sometimes it's OK to be aggressive when the market's moving and we're in one direction, but we've had lack of volatility," Keene said, adding that volatility creates "opportunity" for a trader.

Both bullish and bearish trades Keene has made have been foiled by the general lack of market movement. A fundamental difficulty in options investing is that whether one is betting on a rise or on a fall, he will only see a profit if the underlying stock actually moves.

But market movement has been lacking — notably, the S&P 500 has gone 76 sessions without falling 1 percent or more. And expectations for future volatility, measured by the CBOE volatility index, ended last week at multiyear lows. The VIX uses the prices of puts and calls on the S&P 500 to measure the expected magnitude of future moves.


"So this is an environment where we're sitting here, the VIX is hanging out, the S&P 500 is not really moving. Very tough environment to be trading in any equity names, or the SPX, or the VIX," Keene said.

The tough start to 2017 comes after a 2016 in which many of his trades paid off, including a bold bullish bet on Freeport-McMoRan.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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