Volatility Views 70: Stop Worrying about Black Swans

Volatility Review: Selloffs continue, though the VIX has not changed much. VIX review. NASDAQ vol review. Almost no change in realized vol. Volatility Viewpoint: Some interesting topics emerged from this week's global derivatives conference:

• Is vol cheap? When VIX cash hit 13.5 this year, the cost of the six-month hedge was the same as the day after Lehman defaulted.
• VIX ETPs are problematic, part 1: They are not very adaptable to new volatility regimes.
• VIX ETPs are problematic, part 2: In the last 15 minutes of the trading day, VIX futures are far more volatile than VIX or SPX themselves, indicating the impact of these structured products on seeking alpha and roll yield.
• Is too much tail risk priced into the market? S&P puts and VIX calls are priced as though black swan events are imminent and occur with alarming regularity, as opposed to being the rare events that they truly are.
• Implied vs. realized volatility premium: Implied volatility premium, as opposed to its realized counterpart, is higher in short-duration VIX options. In general, this favors strategies that sell shorter-dated options and buy longer-dated options.

Crystal Ball: Looking ahead at NASDAQ volatility and the VIX.