January 20, 2015

Volatility Views 142: The Swiss Franc Black Swan

44 minutes

Volatility Review: A look at the week that was:

Swiss Franc: Deutsche Bank AG suffered about $150 million in losses Thursday after the Swiss National Bank abruptly removed the cap on the Swiss franc’s value, sparking a massive rally. Meanwhile, a major U.S. currency broker warned its equity was wiped out, a U.K. retail broker entered insolvency and a New Zealand foreign-exchange trading house collapsed.

Crude Oil: Oil prices fell on Thursday after weak U.S. economic data spurred worries over crude oil demand. U.S. crude declined $2.23, or 4.6 percent, to settle at $46.25 a barrel. Brent crude was last down $1 to trade around $48 a barrel.

Volatility Voicemail: Listener questions and comments

Question from Mark Brant - @Options How long does VIX backwardation normally last and are the reversions to contango sharp or mild?

Question from Analygos - I have heard you discuss previously buying options prior to earnings to capitalize on free gamma with no decay. My question is about after earnings when the premium collapses. Is that technically options decay all coming out of the option at once? Or is it a collapse of implied volatility that is erasing the premium in the options? If the latter then is the decay technically occurring every day prior to earnings and just being overcome by increasing implied volatility leading up to the earnings event?

Crystal Ball: What is coming up for this week in vol? Expiration making things extra crazy.

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