Volatility Views

Volatility Views 121: Something Is Odd with Volatility Skew

Volatility Review: VIX hovering around 16 one handle higher than it was last week. VXST is averaging around 18. Volatility skew - some very strange occurrences this week.

Volatility Voicemail: Listener questions and comments.

• Question from TiklenIvory: What is the best way to short VIX? Straight up VIX puts, or go long XIV?
• Question from James Forrest: I liked the conversation regarding straddle volatility going into earnings. I agree that there should be more research into this area. Jared, I would happily add my $5 to the mix, if that will spur you into action. If you had to guess right now, what percentage of Fortune 500 names do you think outperform their straddle in any given quarter?
• Question from Eligo: RE: Straddle debate from episode 120. Should any straddle research into earnings incorporate dynamic hedging into the results? For example: If the underlying does not net outperform the straddle, but there are multiple opportunities to dynamically hedge during the trading session, it would net be profitable. Should this be incorporated into any future straddle research, or does this add too much complexity to the equation?

Crystal Ball: How long can volatility stay in the low teens? What could possibly cause a move higher?

Volatility Views 120: Breaking down Earnings Straddles

Volatility Review: A little calmer week, at least compared to last week. VIX Options:3.8 calls to puts - way off the charts! Top open interest positions

• 245,725 .VIX Aug-14 15.0 calls
• 241,232 .VIX Aug-14 16.0 calls
• 238,364 .VIX Sep-14 19.0 calls

Decent movement in RVX, but no appreciable volume to accompany it OI: 470. Crude oil stable following recent volatility hovering around 14%.

Volatility Voicemail: Listener questions and comments

• Question from Nick Snow - Figured this would be a good place or at least the right place for this question. What is implied vol? I mean to ask for a stock we just get one number but every strike has a different IV so when we get one is that the average of the smile or is it the ATM straddle vol? Seems like I should know this if I am trading it.
• Question from Mr. Higgins - Dear volatility viewers - the Proshares Ultrashort VIX (UVXY) hit a low in June. I though the spread between VIX cash and UVXY would continue to expand, but UVXY seems to have leveled out. What is your analysis of the trading relationship between these two products? Are they reliable spreading candidates? I am not much for futures so I would probably stick with straddle in each to capture the divergence. Thanks for the program - please give my regards to Don.

Volatility Views 119: Craziest Week Ever

Volatility Review: crazy week for VIX cash. It had a range of 10.59 to 15.38this week. Thursday: largest jump in over a year -- the day after Jul options settled at a 7-year low settlement print of 11.03. VIX takes big jump on Ukraine, Middle East worries. Set against another Malaysian Airlines crash and rising Middle East tensions, the VIX had its greatest jump in more than a year on Thursday, closing at 14.54, up 32.18%, this represented the VIX's greatest rise since April 2013, reported Bloomberg. Gold jumps 1.5% after plane crash. GLD options breakdown: 2.1 calls to puts, Aug IV - 14%. Has been mostly hovering around 12% recently. Malaysian crash wreaks havoc on wheat futures market.

Volatility Voicemail: Listener questions and comments

• Question from George: I do not know whether the VIX index or the implied volatility and historical volatility of the SPY ETF can be better indicator to make sure where the SPY, so the most assets, head. How do you use these indicators together for your work? I would use other indicators too such as moving averages, volume underlying price, RSI and other major supports and resistance levels of the underlying prices. Thank You. Regards, George
• Question from Anthony: I just downloaded the CBOE skew index data and worked a little excel fu. The average of the skew index since inception is 117.43. It went out on Wednesday at 134.86 - if my reading of this is correct then that shows a substantial premium to SPX puts going into Thursday’s correction - which says a lot of people were hedged? Of course this is substantially lower than the recent high of 143.26 set on 6/20. So apparently fewer people were concerned about a selloff prior to the actual drop. After Thursday’s selloff the index dropped again to 131.65. That surprised me since I’d think the panic would spark more put buying. Does this indicate the market isn’t as concerned as the selloff might initially indicate?

Volatility Views 118: The VIXFather Turns on His Creation

Volatility Review: VIX Cash: the week’s range was 11.01-13.23. Thanks to concerns about Portugal's banks repaying debt, Europe's VStoxx Index and the VIX jumped on Thursday. Will earnings season usher in volatility? VIX Options. VXST Options. SPX Skew. Robert Whaley, the inventor of the CBOE Volatility Index, or VIX, warned that investors are not getting what they pay for when they buy volatility-linked products. Mr. Whaley, now a professor at the Vanderbilt University Owen Graduate School of Management, addressed the issue of their effectiveness on Thursday at ETF.com’s Global Macro ETF Strategist Conference in New York.

Volatility Voicemail: Listener questions and comments

Question from Morgan Shebanek - Owwwwww!!! Just downloaded the mobile app. Pretty nifty even if it is redundant as all pertinent episodes are automatically put into my Podcast Que. Enjoyed the latest episode and yes I can attest as to the accuracy and timeliness of your "Vol Call" As a retail investor who has a couple regular accounts but no futures trading capability I have a question. So I want to utilize a trade on Vol? Ok, what the heck am I supposed to use?? TVIX & VXX? They look like terrible products. VXST? Can't trade it. The options are listed but when I tried to trade? No go. OoooK. So I feel like I am left using puts on SPY or QQQ. Maybe some RVX if the Small caps look like they are going to roll but I digress. Please help me find the proper product. I am not looking to hedge but rather playing a "trade" in Vol when I feel the timing is correct. Thanks for all the Mad Knowledge. Keep it up!

Crystal Ball: An outlook for VIX, RVX, VIX ETPs and other volatility products for the upcoming week.

Volatility Views 117: Getting Your Face Ripped Off By Vol

Volatility review: VIX cash had a range of 10.92 - 12.51 last week and has been on an uptrend for most of the week. A look at VIX futures. A riddle from Don. VXST, RVX options. Gold/metals vol: GVZ range of 12.64-13 last week. General downtrend in gold vol after sharp spike the prior week

Volatility Voicemail: Listener questions and comments

• Question from One of the Men ‏@optionideamen: @Options VXX going to collapse into the 4th of July holiday. Buy the 7/11 28p. Winner. U can thank me later. Freebie.
• Question from Atlantan - I find the topic of volatility ETPs and their net impact on volume in the primary products very interesting. When products like VIX futures were conceived the notion of retail trading those products was inconceivable. To say nothing of retail oriented VIX products like VXX and others. But it seems like these products are the big drivers of volume these days. I might even go so far as to say they are essential. Do you agree? Is it even possible in the current environment to have a successful volatility future or option without a related ETP providing a steady source of volume? Fun show. I look forward to my weekly dose of all things volatility. Any chance of some ag vol rundowns in future episodes?
• Question from Giuseppe Varino - To what do you attribute the recent vol divergence between the VIX and the Russell 2000? It seems as though Russell vol was unjustifiably inflated. Or do you feel this premium was justified? Do you expect this scenario to reemerge anytime soon or was this a relatively one-off situation?

Volatility Views 116: The Mystery of Gold Volatility Futures

Volatility Review: VIX cash hovering below the 11 handle yet again and the narrative has shifted from "VIX is too low" to "We may see a single digit VIX soon," which Andrew predicted this not too long ago. Top OI Strikes: July 13 Put - 416K, July 16 Call - 385K, July 20 Call - 371K & Sep 19 Call - 261K. RVX: OI still hovering around 5K contracts.

Janet Yellen torpedoed a key catalyst for market volatility, characterizing the recent inflation data as "noisy". GVZ jumps 20% in one session. Oil volatility returns on Iraq fears. Currency volatility plummets.

Volatility Voicemail: Listener questions and comments

• Question from J. Ingraham: loved the discussion of GVZ on the network this week. I’m very intrigued by this product. Like Mark said, GLD and VIX should be two great tastes that taste great together. Yet this product does no appreciable volume. I’ve tried to trade this several times but the lack of volume and terrible spreads kept me out of it. Why do you think GVZ has essentially failed as a trading product?
• Question from Cigar Store Indian: Great show. Thanks for breaking down the problems with volatility ETFs like VXX. I’ve dumped that product from my portfolio after listening to your program. Thanks for helping me dodge a bullet on that one. I also have a question about another ETF product GLD. This product doesn’t seem to have the same issues with regards to term structure. Am I correct in the estimation that this product is safe to buy and hold in my portfolio for longer than a few hours?

Crystal Ball: An outlook for VIX, RVX, VIX ETPs and other volatility products.

Volatility Views 115: VIX Says Poo to You

Volatility Review: VIX cash broke the 11-handle last week while we were recording, but it has since rebounded over concerns in Iraq. VIX futures started to see some backwardation creeping into the curve last week. Is that still the case this week? The death of volatility forces traders to get creative. The Economist asks "Is this the calm before the storm? Bank of America's market risk index falls to lowest level since 2000.

Iraq concerns spike crude price and volatility.

Volatility Voicemail: Question from Indigo Blue - What’s up with gold volatility? The contract is selling off like mad and yet volatility is at near record lows. I have been taking advantage of this opportunity to load up on some GLD premium, primarily verticals. I have also been think about ratio/repair trades in the gold futures options. Thought on this crazy gold volatility environment?

Question from VIXinator - Do you think this is a good environment for a cheap VIX vertical - maybe Jul 16/20 CS for $.35 or Sep 17/20 CS for $.60?

Question from Andy Braga - What do you think about Apple as a dispersion candidate going forward? Do you think the split will take the wind out of its sails from a volatility perspective, or is it perhaps more attractive here?

CRYSTAL BALL

An outlook for VIX, RVX, VIX ETPs and other volatility products.

Volatility Views114: The VIX Is Dead. Long Live the VIX.

Volatility Review: Another slow week from a vol perspective - VIX Cash vacillating around 11.50 most of the week. Is VIX and volatility too quiet? Is the VIX too cheap?

VIX and VXST options. New volatility ETFs launch. Gold volatility hits 14-month low.

Volatility Voicemail: Listener comments and questions.

• Comment from Angelthorn - Great show last week guys! Finally people not afraid to stand up to the "VIX is cheap" hype machine and back it up with some data. I am join to sell some Vol in your honor.
• Question from George - I do not know whether the VIX index or the implied volatility and historical volatility of the SPY ETF is a better indicator to make sure where the SPY and indeed most assets are headed. How do you use these indicators together for your work? I would use other indicators too, such as moving averages, volume underlying price, RSI and other major supports and resistance levels of the underlying prices. Thank You. Regards, George
• Question from TheAnalyst - I was able to track down a copy of recent BGC research notes through a colleague. I found a comment in the most recent research note, surprising given recent statements to the contrary on Volatility Views. “The one month implied volatility of VIX options as measured by VVIX was featured in our last Volatility Tracker update, and the estimate remains near record lows. Given this discount, VIX options still look more attractive for equity portfolio hedgers than e.g. at the money SPX or SPY puts.” It was my impression from the last episode that the panel, particularly both hosts named Mark, took a dim view of VIX as a hedging tool. Yet the most recent BGC research appears to recommend them. I very much enjoy this program and hope you can shine some light on this discrepancy for me.

Crystal Ball: An outlook for VIX, RVX VIX ETPs and other volatility products.

Volatility Views 113: Fighting Low VIX Hysteria

Volatility Review: A truncated holiday week. VIX cash hovered around 11.50 most of the week. Call/Put hovering at a ridiculous 3.3/1. Is the volatility "crash" reason to worry? Record highs for nine CBOE indexes.

Volatility Voicemail: Listener questions and comments

Question from Jim Charles, Lexington, KY - I know your recent guest Euan Sinclair downplayed the VIX call/put ratio as being due to systemic issues with the products, but that indicator has only risen since that episode. Leading me to believe there is something to it. Where do you guys stand now on VIX call/put? Are we poised for a pop or is this just the result of the CBOE beating the mean reversion drum back to 20?

Question from Annabelle Schmidt - Your guys profiled a sizable VIX vertical call spread in the September expiration cycle. Mark mentioned that it might be tied to an OTC variance trade. Is there any way for customer to get more information on that dark portion of the volatility market? It seems that quite a bit of the daily activity actually occurs in the OTC realm, so we are only getting half the picture if we just look at listed VIX trades. Great show! Great discussions! Hopefully Jared will stay on the program now that he has a new job.

Question from Sienna78 - S&P 500 at record high, VIX at record low, portfolio looking good. VIX Aug 12/16 calls for $2 or SPY Jul 190/170 puts for $2.30 - best protection?

Crystal Ball: An outlook for VIX, RVX, VIX ETPs and other products.

Volatility Views 112: How Low Will It Go?

Volatility Review: VIX cash broke the 12 handle - drifted to a low of 11.68. Is the VIX in a deep sleep? Or has it permanently changed? Is low volatility here to stay? India VIX slumps post-election.

Volatility Voicemail: What do you want to know?

• Question from CNans - Gamma vs. Vega scalping - You have discussed gamma scalping on early episodes, as a way to pay for long volatility positions. Is it not also possible to scalp vega by legging into spreads intraday? Or is scalping a particular activity linked to gamma trading? Would it be possible to do a show entirely devoted to listener questions? That is my favorite part of the program because I always learn so much from your answers.
• Comment from Sly @sportsmentalist: Hey Mark, really enjoyed the Vol views episode with Sinclair. You should do more quant oriented episodes