Volatility Views

Volatility Views 151: The Fix on VIX

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

• VIX Cash: Low: 12.54 - High: 16.37
• VIX Settlement seemed somewhat controversial again this month.
• VIX ETFs: TVIX and VIXY shares outstanding doubled over the past 5 weeks going into the bankers meeting this week.
• S&P: Options contracts that pay off should the S&P 500 lose 10 percent in the next three months, near the time of a potential Federal Reserve rate increase, are by some measures almost seven times more expensive than at the start of the year, the data show.
• Quadruple witching something of a non-event - with expiration every week now, it seems as though triple and quad witching have lost some of their luster.
• VIX Options: Big VIX trades this week - customers buying upside calls in April, particularly 22 & 26 strikes. April 50 call still open.
• Total 3.65m (2.50m Calls, 1.16m Puts)
• Volatility Index Bracketology: Someone beat Jared to the earnings volatility study - Informed traders prefer options says academic research.
• International Vol Review: Russian "mystery" event a bit of a letdown - Could the Israeli election have an impact?
• Crude Oil: The bears had their claws out again for crude oil. Brent down 3% Thursday - WTI down 2%.

Volatility Voicemail: Listener questions and comments

• Question from The Great Donaldo - Hello to the volatility wizards. I enjoyed your coverage of the RMC conference and Marks interviews with some of the speakers. I have never been able to attend the event due to scheduling conflicts. I am also not partial to attending an event that is primarily intended to promote one firms products. So I would appreciate your informed opinions on other volatility-oriented events that you feel are worthwhile for the listening audience to attend. I do not mind some forays into the mathematical realm but I am not interested in modeling so much as strategy and theory. Thank you for all of the work that you do to shine light into the darkness.
• Question from Lee Daniels - What is the absolute baseline level of volatility that we could reasonably expect to see in the marketplace. I have heard you guys talk about a VIX in the low teens on earlier episodes. Is a single digit VIX feasible and if so for how long? Could we ever see a VIX below 5? What sort of situation would it take to achieve such historically low volatility levels in the marketplace?

Volatility Views 150: Doing Our VIX Term Structure Homework

Volatility Review: A look back at the week in volatility:

• VIX Cash: Low: 14.71 - High: 17.19
• Skew Index: 121.53
• VIX Options: Total 5.58m (3.74m Calls, 1.85m Puts). Surprisingly light volume given the activity seen this week. Most days substantially under recent ADV. MSCI options to be listed soon.
• RVX: 65 Contracts open interest. FTSE volatility products coming soon.
• VXST: OI just 25 contracts.
• VolX: A lot of interest in their products down at Boca from market makers as well as domestic & international exchange.
• International Volatility Review: What can we expect from the Kremlin?
• Crude Oil: A volatile week for crude with futures having wild intraday swings. Both Brent and WTI made early gains yesterday only to give them up heading into expiration.

Volatility Voicemail: Listener questions and comments

• Question from Carl Jedredes - What is the traditional slope of VIX futures term structure? How much premium do the long term futures typically exhibit over front month (i.e six month future 8% over front month future)? When the term structure is flat or even backward does this typically benefit ETPs like VXX that are forced to rebalance on a regular basis.
• Question from Beta Ray Bill - Is there some way to use implied volatility to choose your strike when trading options?

Crystal Ball: The wager continues: Fed raising rates in 2015?

Volatility Views 149: History of Economic Data

Volatility Viewpoint: Mark & Bill breakdown the RMC Conference. The most interesting panels and presentations, surprising revelations, and other like or dislikes.

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

• VIX Cash: Low: 13.25 - High: 15.33
• Skew Index: 127.26
• VIX Options: Total 4.97m (3.38m Calls, 1.59m Puts)
• The extended hours for VIX options began trading on Monday, while the extended hours for
• SPX options are expected to start on Monday, March 9.
• International Volatility Review: ECB plans to buy foreign debt.
• Crude Oil: Expect more volatility in oil says Exxon CEO

Crystal Ball: Is vol creeping back in

Volatility Views 148: What Color Is the Dress?

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

• VIX Cash: Low: 12.86, High: 15.48
• Skew Index: 126.20
• The extended hours for VIX options are set to begin Monday, March 2, while the extended hours for SPX options are expected to start on Monday, March 9.
• VIX Options: Total 4.38m (2.98m Calls, 1.40m Puts)
• VIX term structure hits CBOE earnings
• International Volatility Review
• Crude Oil: Volatility returning to oil.

Volatility Voicemail: Listener questions and comments

• Question from Jordan M. - Do you have any updates on the volatility ETF from Robert Whaley that proposes to eliminate the roll yield issues with VXX? Is it coming to market any time soon?
• Question from Smile Creators - Hello, big fan. Thanks for the great shows. Is there a study that tracks Implied vol vs Historical vol? I am interested to see when they are following the same pattern or they deviate. Pakapiko.
• Question from Mr. Bochco - Where do you guys fall on the great 252 vs 365 debate when analyzing volatility? I have heard arguments for both. At the end of the day does volatility not occur even on the weekends and holidays?

The Wager:

• Comment from AvonDude - Recent comments from the Fed this week seem to reinforce Marks stance on rates. Whomever wins the wager should buy the other guy a bottle of the fine liquor of their choice.
• Comment from Mike S. - Not looking good on the Fed front. I probably have to fall on the no change side of the fence after this week. I do not remember which host wagered on what but I would like to see the losing host make a donation to the other host’s favorite charity. That way everyone wins.
• Comment from Tom Statton - I think both co-hosts should buy Mark a steak regardless of the outcome for featuring them on this fantastic program. Well done Mark. I would buy you one as well if you ever make it to Alberta.
• Comment from Mark A. - No way Fed raises this year. When he loses I think Jared should fly to Chicago and host a cocktail party for all Volatility Views listeners. I would happily allow him to buy me some tasty beverages.
• Comment from SylvanElph - Regarding the Fed Bet - It o\is a radio program so the co-hosts cannot wear embarrassing outfits. Maybe buy the other a pizza of their choice? So Jared would have to buy Mark (and Mark) a nice Chicago deep dish and Mark would have to buy Jared a tasty NYC thin crust. Or New Haven style. Whatever his preference.
• Comment from Jeremy Stevens - I think the Fed will have to adjust their rates before the close of 2015. They are too terrified of inflation and stagflation to sit on their hands. Not sure why a blip in CHF in early 2015 would set the tone for Fed policy at the end of 2015? Maybe Mark can elaborate? As for the wager - How about the loser gives away 5 free subscriptions to his services to VV listeners? So Jared can give away some BGC Research and Mark can offer his Option Pit subscriptions.

Crystal Ball: Andrew and Jared prognosticate wildly. VIX cash to below 13?

Volatility Views 147: Men Cause Volatility

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

• VIX Cash: High - 16.74, Low - 15.10
• S&P: 30-day IV - 13, 30-day HV - 15, Skew Index - 131.30
• VIX Options: A decent volume week except for 2/19 with only 250k contracts. Total 3.39m (2.33m Calls, 1.06m Puts). Extended VIX Options trading hours start March 2.
• International Volatility Review: Greece is the word.
• Oil: The battle for $50 continues - WTI March futures back below $50, OVX at $55.75.
• Men create volatility? Could more women traders cut volatility? Experimental market sessions show more women traders = smaller and fewer bubbles

Volatility Voicemail: Listener questions and comments

• Follow-up from Uncle Ben - Thanks for answering my question last week. Your sympathy for my plight as the “lone market participant” is appreciated. Sorry I set off Jared’s racism detector with my handle. I did not mean to derail the program. It just happens to be my name (although I do like the rice).
• Question from Brian T. - You say earnings is a crap shoot, so you simply should not play the game. I say that if you take a systematic, risk-limited short volatility approach, such as with iron condors, you maximize the potential to harvest premium, while eliminating the risk of what Mark referred to as "big blowouts". You clearly have to be judicious with your strike selection, but I have found this to be a profitable long term approach to earnings season.
• Question from Tim Biggs - Any data on that theta free approach to earnings? What percentage of decay occurs prior to the event vs. post-event and how does that compare to underlying movement during the period?

Crystal Ball: Will the Eurozone move towards gradual progress? What does economic growth really mean? Other wild prognostications.

Volatility Views 146: Betting on Fed Volatility

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

• VIX Cash: High - 19.28, low - 15.26
• S&P: 30-Day Imp. Vol - 13, 30-Day Hist. Vol - 16. Skew Index - 129.94
• VVIX: Thursday Close - 93.24
• VIX Options: 700K contracts on Feb 12, for a strong up day for the market. Total 5.36m (3.28M calls, 2.08M puts).
• Extended VIX Options trading hours start March 2.
• Upcoming launch of RealVol SPY Options on BOX - good news for our former co-hosts.
• VXST: Current open interest: 3 contracts.
• RVX: Current open interest: 58 contracts.
• International Volatility Review: RVI - Russian Volatility Index

• OIL: WTI March futures are back above $50, after dipping below it again. OVX still hovering near $60, 6-month chart of OVX is pretty impressive.

Volatility Voicemail: Listener questions and comments

• Follow-up from Uncle Ben - Thanks for answering my question last week. Your sympathy for my plight as the “lone market participant” is appreciated. Sorry I set off the racism detector with my handle. I did not mean to derail the program. It just happens to be my name (although I do like the rice).
• Question from Tim Biggs - Any data on that theta free approach to earnings? What percentage of decay occurs prior to the event vs. post-event and how does that compare to underlying movement during the period?
• Question from George - This may seem like a silly question but does anyone go out and look at old VIX cash data from 30 days ago and compare that to current realized? Is that not what VIX cash is attempting to predict? Is that disseminated anywhere as a number or index? Something along the lines of a VIX Accuracy Index?
• The Wager:
• Comment from Tom Statton - I think both co-hosts should buy Mark a steak regardless of the outcome for featuring them on this fantastic program. Well done Mark. I would buy you one as well if you ever make it to Alberta.
• Comment from Mark A - No way Fed raises this year. When he loses, I think Jared should fly to Chicago and host a cocktail party for all Volatility Views listeners. I would happily allow him to buy me some tasty beverages.
• Comment from SylvanElph - Regarding the Fed Bet - It is a radio program so the co-hosts cannot wear embarrassing outfits. Maybe buy the other a pizza of their choice? So Jared would have to buy Mark (and Mark) a nice Chicago deep dish and Mark would have to buy Jared a tasty NYC thin crust. Or New Haven style. Whatever his preference.
• Comment from Jeremy Stevens - I think the Fed will have to adjust their rates before the close of 2015. They are too terrified of inflation and stagflation to sit on their hands. Not sure why a blip in CHF in early 2015 would set the tone for Fed policy at the end of 2015? Maybe Mark can elaborate? As for the wager - How about the loser gives away 5 free subscriptions to his services to VV listeners? So Jared can give away some BGC Research and Mark can offer his Option Pit subscriptions.

Crystal Ball: Mark and Mark prognosticate wildly.

Volatility Views 146: Betting on Fed Volatility

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

Volatility Voicemail: Listener questions and comments

Crystal Ball: Mark and Mark prognosticate wildly.

Volatility Views 145: Debating Earnings Skew and Corporate Racism

Volatility Review: A look at the week in vol:

• VIX Cash: High: 22.81, Low: 16.67
• S&P: 30-day IV: 15, 30-day HVOL: 16, Skew Index: 127.54
• VVIX: Thursday close: 98.56
• VIX Options: Total 4.80m (2.86m Calls, 1.95m Puts)
• Market now loving CBOE numbers, stock off 5.5% - earnings were up 7.6%, but missed expectations. Extended VIX Options trading hours start March 2.
• VXST: Another week of anemic volume dispute significant underlying movement.
• RVX: Still no appreciable volume.
• OIL: Another crazy week for oil - rallies over 20%, then clipped, the rallied more again. Currently hovering above the $50 strike again.

Volatility Voicemail: Listener questions and comments

• Reply from Ernitin14 - @OptionsInsider love Vol Views show. Here's my counterargument on remarks on skew shape. If everybody is hedging their short bet, vol squeeze is very likely which is exactly what happened in GOOG post earnings. Yes ATM call spread were the best plays, in case it was a win - win situation. Blow out numbers - upside explosion, so-so numbers- covering their shorts. What I am missing?
• Question from Uncle Ben - Liked the discussion on risk premium from the last episode. This is a topic I have always struggled with. It seems like you are chasing your tail either way. If you compare straightforward 30-day implied vol vs. historic vol, then you are comparing an indicator that is really 30 days forward with an indicator that is nearly 30 days lagging. It does not make much sense. If you attempt to extrapolate realized vol forward, you run into the same errors that plague implied volatility. There are millions of dollars spent on volatility forecasting models that cannot get it right, so what chance do I really have with my own little algorithm? Is this all a fool’s errand?
• Comment from Alvo - Hey guys - just a note that 30-day historical vol actually measures about 20 trading sessions, with 30-day implied vol foes out a full month. Different size sets = problems.

Crystal Ball: Andrew and Jared prognosticate wildly.

Volatility Views 144: Talking Earnings Volatility

Volatility Review: A look in the week from a volatility perspective

• VIX Cash: High: 21.55, Low: 15.52
• S&P: 30-day IV: 18, 30-day HVOL: 17, Skew Index: 130.44. Goldman says nap time for put sellers.
• VVIX: Thurs close: 100.70, Week range: 91.85-109.99
• VIX Options: Total 4.29m (2.97m Calls, 1.32m Puts)
• VXST: Another week of anemic volume despite significant underlying movement.
• RVX: Still no appreciable volume.
• OIL: Another crazy week for oil. Saudi prince reiterates that "we will never see $100 oil again." OPEC Chief says this may be the bottom for oil.

Volatility Voicemail: Listener questions and comments

• Question from NINC - Hey Volatility Views guys. I know you have discussed the topic of earnings studies in the past, particularly as it relates to earnings straddles. You said there was not much research on the topic. Has the situation changed since that conversation? Has there been any new research on the topic? I know you discussed the possibility of doing such a study for this program? What is the status of that study? Please let me know when you release it as I would be very interested in the results. Thank you for this network. I am a regular listener of volatility views, options boot camp and the news rundown programs.
• Question from Andrew S - If you had to lean long or short going into every earnings cycle which way would you go? Me - I am tempted short but I am terrified about the blowout events.
• Question from Nitin Gulati - @OptionsInsider Funny how $GOOG moved today, apparently skew was bid up all day yesterday, so not a surprise.

Crystal Ball: Mark and Jared prognosticate wildly.

Volatility Views 143: The Great Fed Debate

Volatility Review: The week in volatility

• ECB takes all of the vol out of the market in one fell swoop. S&P 500 volatility streak longest since '12 as 1% moves multiply. The S&P 500 Index rose 0.5 per cent yesterday and moved 1.3 per cent from its lowest to highest levels.
• VXST: Another week of crappy volume. (The Mystery of Short-Term Volatility)
• FX Volatility: Another crazy week following the Swiss Franc crisis.
• Crude Oil: Crude continues to take it on the chin. Domestic crude supplies at near record levels. Iraq increasing production to offset declining revenues. Death of the Saudi King adding to the confusion.

Here’s the chart that Mark was referring to from Daily FX:

Volatility Voicemail: Listener questions and comments

• Question from Marcus N - You discussed the retracement from backwardation to contango in VIX Futures on the last episode. If I thought the retracement would be rapid and I wanted to play that retracement, would the near-term futures or options be my best bet?
• Question from Avrile - Risk premium - What is it? I have seen it defined many ways. Is it a products 30-day implied vs. 30-day realized? 10-day vs. 10-day? If using 30-day realized that’s a lagging indicator. Do you then have to extrapolate that forward using an algorithm, then compare that to 30-day implied to get a more accurate number? What about comparing something like front month or 30-day implied SPX volatility vs VIX Cash or VIX Future? Is that the best surrogate for the markets risk premium? Or has VIX Cash become such a polluted number that it is better to stick with straight SPX implied volatility?

Crystal Ball: Mark and Jared prognosticate wildly!