Volatility Views

Volatility Review: An action packed week on the market - shrugging off the non-farms.

• VIX Cash: Major indexes selling off over 1% Thursday.
• VIX Options: A big call stupid going up in June/July 20s.
• VXUP/VXDN: VXDN not catching fire like the VXUP
• Crude Oil: OIV & OVX
• IMF: The Mark-Jared bets continues.

Volatility Voicemail: Listener questions and comments

• Skew: What is it? Should it exist? Why does it exist?

Around the Block: Summer VIX is back in season.

Volatility Review: The week in review, from a volatility perspective

• Some action earlier this week as S&P dropped over 1% and VIX popped to the 14 handle.
• VIX Futures: Front month future flirted with 15 during the selloff.
• VIX Options: Anemic volume week post-holiday - only 63k contracts through 11am. Still mostly call buyer in June - primarily VIX. Total 6.06m (4.73m Calls, 1.33m Puts)
• VXX: Puts trade in iPath S&P 500 VIX Short Term ETN (VXX) are up 0.34 to 19.02 today. VXX is near the lower end of the 52 week range.
• VXST: Volume: 0, OI: 4. VXST will be replaced by VIX weeklies probably by the end of the summer depending on VIX weekly approval and launch.
• Crude Oil: OIV: 33.04; OVX: 32.5

Volatility Voicemail: Listener questions and comments

• Question from Aeschylus - One thing I cannot understand clearly is why there is so much focus on the volatility smile. Given my knowledge of the Black and Scholes model, this is what I get: People use the volatility smile as a forecast of future volatility. They assume that the market is 100% efficient and everyone would engage in dynamic hedging if they could or that everyone agree that the Black and Scholes model gives the "fair" price for the option, whatever it means to them. Therefore any difference between the market price and the BS price shouldn't be interpreted as an opportunity for arbitrage or a presence of model risk, but what 'the market' is saying the BS parameters should be, in special the volatility the market is predicting for the future time until the maturity of the European option.
• Question from James Bass - Why is IV different between put and call of same strike? In his book Dynamic Hedging Nassim Taleb says that the volatility of an OTM put should be exactly equal to that of a corresponding in the money call of same strike. But in option chains, the calls always have a slightly higher IV than the corresponding put. Is this because I am looking at American option chains and not European?

Volatility Review: Looks like the market started taking the weekend out on Thursday, and never looked back.

• VIX Cash: Low: 12.09, High: 13.27
• S&P 30-Day realized: 10, S&P 60-Day realized: 11 VVIX: 74.50 - on the lower end of its recent range.
• Skew Index: 121.11 - also on the low end of recent range.
• Put vs SPX White Paper: A Leveraged Portfolio Management Approach Applying The CBOE S&P 500 PutWrite Index.
• VIX Options: A strong volume week. 945K Contracts on Monday, 750k Tuesday, 700k Wednesday and only 350k Thursday.
• VIX Up / VIX Down: Despite our doubts last week, the product is doing heavy volume.
• Question from IVDaily - Please explain the VXUP and VXDN products to me. I am very confused. What am I getting if I buy this thing? Its not really spot VIX that I am getting, but the actual percentage move in the spot VIX, correct? What does this paired contract thing mean? Do I have to wait for someone to sell VXUP before I can buy the VXDN and vice versa? Shed some more light into the darkness please guys.

Volatility Voicemail: Listener questions and comments

• Question from Gerry Engle - Hola fellows. Like the programs especially Option Block and Volatility Views. I noticed you guys do not talk much about technicals. The few times you have mentioned them you seem to take a dim view of them. Why is that? Are there no technicals that you feel are useful for options traders to pay attention to? What about volatility technicals?
• Question from Ibrahim Hawash: Hi Mark. This is Contrails again, after several months away from options I forayed into Forex my original trading stumping ground smile emoticon I learned a lot about price action support and resistance, trend lines, pivots etc... I am looking now into options for position trading. I am so comfortable doing directional trades, bullish and bearish speculation and not yet into vol trading. My question is if I find a stock sitting on strong support and at a very low IV% (MU and PG is what I am looking at) along with confirming buying volume would you buy a OTM or ITM calls? I have a feeling you will say why not sell puts smile emoticon but let’s stick with calls for now given my account restriction. Is there a golden rule on choosing ITM vs OTM in this situation? I read that only buy ITM calls because OTM expire worthless as in hear.
• Also my understanding that when IV% is very low you would not buy call vertical spread and choose to buy calls, is this correct? I also have a question, do leap options IV increase at earning times along with shorter expiration options? One more thing, forgot to ask that I am looking to buy calls expiring in 2-3 months and I am looking at daily candle stick charts.

Crystal Ball: Reckless prognostication. Will there be a Tuesday morning pop?

Volatility Views 158: Is VIX Without Contango Even Possible?

Volatility Review: A look back at the week in vol

• VIX Cash: High: 15.13 - Low: 12.41
• VVIX: 82.12
• S&P 30-day realized Vol: 10
• VIX Options: Total: 7.84m (5.84m Calls, 2.01m Puts)
• Single largest VIX Options trade in History. Sold VIX July 17-23 1x2 call spread to close. Bought July 17-23 1x2 call spread to close play $0.11 - essentially rolling out to July. Size was 1.08M contracts total.
• Crude Oil: Crude bears are starting to show their claws again.
• OVX 31.67 - OIV 32.18
• This comes after today may set a near-record 9th week of gains for the most consecutive weekly gains in at least 30 years.

Volatility Voicemail: Listener questions and comments

• Question from Andrew Grove - Are there any packaged products out there that will replicate a long or short delta-neutral straddle position? The key part I believe would be the adjustments as the product would require multiple adjustments to remain delta neutral. I have listened to your program for a long time and come to the conclusion that delta-neutral is the best way to capture volatility in the marketplace right now. But I do not want to tie up all of my capital and all of my time managing and adjusting one trade. I would prefer to buy or sell something that handled the lion’s share of the work for me. If there was some slippage on the execution I could live with it as the ultimate cost of using a packaged product vs. doing it myself. Thoughts? Am I crazy? I would love to get the old VolX guys opinion on this as well if possible since I assume they have insight into this issue.

Volatility Viewpoint: Today's guest is Euan Sinclair, Author of Volatility Trading Editions 1 & 2, as well as Options Trading. He discusses:

• What is driving the pronounced decrease in VIX?
• What were the primary drivers of the dramatic increase in "Vol-of-Vol" we saw at the end of 2014?
• CBOE is launching VIX weeklies soon. Does he feel they have the potential to succeed where VXST has failed miserably?
• A sneak peek of any book he currently has in the works.

Volatility Review: A look back at the week from a volatility perspective

• VIX Cash: Low - 12.10, High - 16.36
• VIX Options: Total 6.62m (4.76m Calls, 1.86m Puts)
• Crude oil: OVX & OIV

Volatility Voicemail: Listener questions and comments

• Question from Mark Brant: Please address how IV chain structure can make a spread more viable or less viable and how liquidity affects such IV structures.
• Question from AdamVega:Hello I am a big fan, thank you for your great shows. I have been looking for a platform that I use for Backtesting. I currently use thinkorswim but Backtesting is slow and not reliable. Any suggestions? Thanks AdamVega

Volatility Review: A look back at the week from a volatility point-of-view

• VIX Cash: Low: 12.33 - High: 15.29
• VIX Options: Another modest volume week.
• 75k May 20 calls purchased Wednesday for $.40.
• Paper buying June 23 puts for $.15.
• June 17-20 call spread vs 14.5 puts went up nearly 30k times. May/June 13.5 put spread trade 10,000 times.
• Total 6.14m (4.39m Calls, 1.75m Puts)
• Options volume slid in first quarter.
• Volatility cycles and stock trends.
• International Volatility: India VIX caps monthly advance as futures rollover below average.
• Crude Oil: OVX - 36.09, OIV - 36.95

Volatility Voicemail: Listener questions and comments

• Question from Eli - Would you agree that VXX shares are a useful intraday way to trade volatility? What is the longest you would consider holding that before the roll yield effect begins to kick in?
• Question from Oaklander - Do VIX options suffer the same from time decay as regular options? Are there peculiarities to the VIX formula that make the options perform differently on a theta basis?
• Question from Charlie B - Long VXX vs short OTM front month VIX call. Can this be considered a covered call? What other sorts of "volatility yield" strategies can you recommend?

Crystal Ball: Wild prognosticating? You betcha. Non-farms have been rather “meh” lately, with people selling vol into non-farms. What’s the outlook for this week?

Volatility Viewpoint: Today’s guest is Mike Thompson of Typhon Capital. He discusses:

• VIX Futures
• VXST
• The mainstream acceptance of volatility
• VXX and VSTOXX

Volatility Review: A look back at the week from a vol perspective

• A groundhog day in volatility.
• VIX: volume down significantly.
• VIX Options: Put love later in the week. June 14-18-21 fly spread going up.
• Gold: GVZ hitting a seven month long, near the 15 handle.
• Crude Oil: The bulls are back in crude.

Volatility Voicemail: Listener comments and questions

• Question from Tim Engels - Been a lot of ink lately about VIX volume being in the toilet. You guys have touched on it once or twice on the program as well. Why do you think the volume has fallen off a cliff?
• Question from Theist - Reading about delta neutral strategies. But the profit seems small for each adjustment, commissions seem large for the adjustments, and the values for many of the variables (delta, vega) seem questionable at best. Is this really a viable strategy over the long term or are there better way to capture volatility in the marketplace?
• Question from Frank Underwood - Any good mobile apps out there for volatility analysis? Seems like I am always on the go and never at my desk when a good trading idea strikes me.

Crystal Ball: Reckless prognostication. Looking for VIX to rise over next week or two.

Volatility Review: A look back at the week from a volatility perspective.

• Greece bringing some volatility back to the table.
• VIX Cash: Low: 12.50 - High: 14.75
• Earnings do not seem to be injecting much Vol into the market.
• S&P: Skew Index: 120.37
• VIX Options: Our friend with the April 13 puts decided that discretion was the better part of valor - sold 90,636 of them on Tuesday for $.05. 800K contracts on Tuesday. Total 4.22m (3.12m Calls, 1.11m Puts)
• Elizabeth Warren: Tax the banks. Warren called for a transaction tax on firms that use computer-based trading systems to make rapid-fire transactions. She said taxing so-called high-frequency trading would make the market less volatile and give smaller investors a fighting chance.
• Crude Oil: The bulls are back in crude - OVX: 43.48, OIV: 42.67

Volatility Voicemail: Listener questions and comments

• Question from K9 - Why does no one in the US talk about VSTOXX as a volatility gauge? I think it does a better job of measuring overall Vol by taking the square root of the implied variance rather than the convoluted VIX formula. It also does not have all the outside influences polluting the calculation the way VIX does. Maybe this should be something you guys include in your program going forward?
• Question from Fred - My study of options is enjoyable, but it takes so long. I am going to be 200 before I know anything… Do you think expiration Friday has changes in significance in recent years? Is it not really that much of a big deal anymore?
• Comment from Mark Brant - Inspired by C-bass video: AAPL, Sell W234 6-Strike Iron Butterflies; Buy W7 Straddle. Credit is 20% of margin requirement...AAPL Week2 1X5 modified Iron Butterflies with long 5X gamma wings are working!

Crystal Ball: Maybe check the expiration date of the contracts you trade. Just saying. Will there be an all-time high in S&P 500?

Volatility Review: A look back at the week in volatility

• VIX Options: April 50 calls still open - someone made a massive play in May calls. A ton of new volume in June 17-23 calls, nearing the 1M mark total for just today.
• Crude oil: Call option trades target return of $100 US crude oil.
• Other Volatility Topics: Apple Watch - can it bring back the glory days of AAPL?

Volatility Voicemail: Listener questions and comments

• Question from Rahul Tandalkar - Sir. Can you please tell me a website where I can find implied and historical volatility for Indian stocks?
• Question from J Dog - So VXX is crap! We all know this. Are there any VIX ETFs that you guys like?
• Question from Tom Snydon - What can I not trade options on OVX?

Crystal Ball: Sold to you, and more wild speculation.

Volatility Review: A look back at the week in vol

• VIX Cash: Low: 12.89 - High: 17.19
• S&P: Skew Index: 122.86
• VIX Futures: Stories from the front
• Question - Hi Mark: My story is about a professional trader in VIX Futures who claims he lost heavily because the electronic broker he was trading through had the wrong expiration date – it was one day early. Apparently this professional trader had a position of over $100M. Apparently the wrong expiration date had been posted for several months. He won an award for over $2m at a FINRA panel behind closed doors.
• My questions: What is your reaction? If you are a VIX Futures trader do you typically hold your position over days/months or do you close out at end of day? It seems also possible that if the wrong expiration date was published, a VIX Futures traders could also come out ahead on the positive side of the balance sheet? What is your take on VIX Futures?
• VIX Options: April 50 calls still open - someone is quite optimistic about April Vol. Total 4.49m (3.03m Calls, 1.46m Puts)
• International Vol Review: More from the Russians?
• Crude Oil: Call option trades target return of $100 US crude oil.

Volatility Voicemail: Listener questions and comments

• Question from Charlie C - Hey Vol Viewers. OIV and OVX both hovering around 50 - which has the best chance to pop?
• Question from Mark - Liked the discussion about the structural volatility of the market from the last episode. Allow me to pose a related thought question to you. Mark Longo stated on the show that it would take “world peace and perfect harmony in the markets” to get the VIX below 5 for any substantial period of time. But what if the S&P were to double or even triple in value? According to the skew curve wouldn’t that bring us down into a VIX in the single digits? Perhaps even below five? Probably more feasible than world peace. Good show. I have to side against Jared in the Fed wager. The odds of a raise this year don’t look very good. If I throw my hat into the ring can I get in on the inevitable steak party that Jared will be throwing in Chicago? I like my T-bone medium rare please.