Volatility Views

Volatility Views 80: The Listeners Take Over Volatility Review: NASDAQ realized vol hits 11.33, a continued downtrend not only in NASDAQ, but also S&P vol. The Russell is garnering premium over everything else.

Listener Mail: Our listeners are keeping us busy with questions.

• Question from JoJo - I love the show! Have you thought about bringing on a CTA?
• Question from Justin Deveroe - Can you walk me through a few potential use-cases for a NASDAQ vol contract? I like the show and I'm intrigued by the idea, I'm just not sure how to trade a product like that.
• Question from Little Tim - Why do you think GLD is "underperforming" right now from a volatility perspective? SLV seems to be stealing all of the thunder in the volatility realm these days.Question from Theodore Grey - I enjoyed your recent shows featuring financial advisors, but I found the reticence of many advisors to even implement basic hedges very troubling. Why do you think so many advisors and asset managers lack even basic knowledge of volatility or how to hedge a portfolio with options?
• Question from Allie, Anchorage, AK - I have about $25,000 in my trading account. I've learned a lot about the realized vs. implied discrepancy by listening to this program, and I would like to capture that in my own trading. Unfortunately delta neutral trading is pretty much out of the question with my account balance. What do you recommend for someone like me who would like to practice what you guys preach, but doesn't have access to an institutional level account? I'm sure many of your listeners are in a similar situation.
• Question from Monster6 - Correlation is a growing concern across asset classes; it's all but impossible to diversify away risk in this marketplace. Would you guys advise your listeners that a volatility/derivative component is the best way to truly hedge/protect a portfolio these days? If so, which would you recommend?

The Crystal Ball: Perhaps the Russell will be our salvation for a little action over the weekend. Looking for price increases in all the major indexes in the future.

Volatility Views 79: Derivatives Strategy ConsultingVolatility Review: Premium coming out post non-farm payrolls. How long can volatility stay this low? Will VIX have an 11-handle by next week?Volatility Viewpoint: Today's guest is Mark Shepherd, Founder of DSC, Derivatives Strategy Consultants. He discusses what types of structured products his firm offers, how he advises clients in a low volatility environment, and how he hedges his clients.

The Crystal Ball: What will juice volatility in the coming weeks? The metals remain the last bastion of volatility in this market.

Volatility Views 78: Making Money in Spite of Yourself

Volatility Review: Apple set fire to their earnings estimates, and then plunged to murky depths. NASDAQ vol. Implied vols, as measured by VIX, are currently at the same level as 21-day realized S&P vol, but are still overpriced with respect to shorter, 10-day realized.

Listener Mail: Don, Mark, and Mark dive into the listener mailbag.

• Email question from Neil Ducat: I like the discussion of commodity volatility on your recent episodes. Are there any plans to include a regular commodity vol update in your Vol Review segment?
• Email question from Tim S.: The commodity discussion on your recent episode was illuminating. I would like to ask your opinion on this: Given the success of commodity options and futures, why haven't commodity volatility products (like gold VIX, etc.) really taken off and captured the imagination of the investing public?
• Twitter question from Mr. Auto: With Apple and other recent names blowing through their straddles post-earnings, would Don concede that there are indeed times when it is appropriate to buy volatility?
• Comment from Alfonso Strolli, Florence, Italy: Ciao Vol Views crew! I find your program very informative. Mark Longo is indeed the voice of options, and certainly the best in the world at what he does. Don provides the perspective of a veteran of many volatility battles, and Mark Sebastian is nothing but entertaining. Thank you for this great and unique program. Keep up the good work!
• Email question from Tim42: Has Don ever bought an underlying, or does he sell those too?
• Email question from Ed: I am very interested in SPX and SPX volatility (aka VIX). I understand Mark Longo is a former SPX market maker, what are his impressions of the current trading range of SPX vol vs. his time in the pit? Does it perform differently now than it did then? Also, if possible, could he share his favorite trading story from his SPX days? Thank you very much.

The Crystal Ball: Gold and silver catching eyes of those looking for volatility.

Email question from Donald Simmons: With volatility trending lower and no relief in sight, what do the hosts think of interesting strategies for a time of stagnant volatility?

Volatility Views 77: Volatility from a Wealth Advisor Perspective

Volatility Review: Bob Krause pinch hits for Don in this episode. Volatility has recently jumped in corn and interest rates, but is still at very low levels when compared to a very long-term historical viewpoint. NASDAQ volatility has been moving roughly the same as S&P.

Volatility Viewpoint: Today's guest is: Randy Swan, Co-founder of Swan Wealth Advisors. He discusses:

• Overlays
• How, as a wealth advisor, he tailors strategies
• How he incorporates volatility and volatility levels into his strategies
• How he hedges the S&P 500
• How he feels about some advisors still clinging to outmoded traditions
• And more

Crystal Ball:NASDAQ and S&P outlook. It seems like the one thing we were looking for to juice the market and give us some vol in the near future has been taken away from us -- hence the massive selloff.

Volatility Views 76: Commodity Futures and Volatility

Volatility Views: Not much happening from a volatility perspective. NASDAQ vol review. VIX review.

Volatility Viewpoint: Today's guest is Rob Heineman, a commodities broker at the Chicago Board of Trade. He discusses strategies to use going into crop reports, skew, volatility arbitrage, the impact of one commodity on another, the impact of weather, and more.

Crystal Ball: NASDAQ and S&P outlook. It looks like it might be more of the same with little vol movement. We're stuck in the mid-winter summer doldrums.

Volatility Views 75: New Year, New Questions

Volatility Review: Happy 2013 to all our Volatility Views listeners! The market rallied across the board and then sold off after a deal was finally struck in Washington. S&P vol review.

Mail Bag: Keep those questions coming.

· Tweet from Southbay Trader: I especially like Volatility Views!

· Tweet from Billmoo: OIR - Top Financial Podcast of 2012!

· Email from Allen Jacobs - Danbury, CT: Can you guys talk about dispersion trading? I've heard that term quite a bit recently. I think it has to do with volatility trading, but I'm not sure how or why, but I think I've turned to the right people for help. Thanks for your show Mark, it's a big help to people like me, who aspire to one day be volatility pros like you guys.

· Tweet from Leroy: Why weren't people aggressively shorting vol pre-cliff deal like the debt deal?

· Email from Anonymous: I run the vol book at a local shop. I found your show about Mr. Black Swan very illuminating. I've read all of Mr. Taleb's books and even met him several times. Like you, I assumed his trading style to be heavily long premium, and was surprised to hear the opposite. I would expect former market makers like "the Marks" and a former upstairs trader like Don to be aggressively short ATM premium, but not Mr. Taleb. He appears to be preparing himself for his black swan events by back spreading and being net long units, so it isn't a complete cop-out - he's not just writing ATM straddle and heading for the hills. Like all of you and your recent guest (Jared Woodward), I too am left with a somewhat bitter taste in my mouth after learning this information, it doesn't fit with the overall message and marketing of his work.

· Email from Theodore Grant - Pittsburgh, PA: Mark, Volatility Views is my favorite show on your network! I wish there were more podcasts out there talking about volatility trading - you guys truly stand alone. My question has to do with tail risk, one of your favorite subjects. You guys always talk about tail risk and how it's become dramatically overpriced in indexes like the S&P 500 and even large cap stocks like Google. What about in commodity products like GLD, corn, oil, etc.? In those products the tail risk is found on the upside. Do you see the same overpricing of premium in the upside calls in those products as we currently see in downside SPY and Google puts? Thank you.

The Crystal Ball: Earnings season kicks off next week. Are we heading towards the winter doldrums?

Volatility Views 74: Digging Deep into the Listener Mailbag

Volatility Review: Most indices down 1% fueled by rumors out of Washington about a collapse in the deal over the impending "fiscal cliff."

Listener Mail: So many questions for us to answer.

• Tweet from Doc Hudson: What is your pick for volatility trade/product/development of the year?
• Tweet from Man of Steel: What do people mean by “selling or buying skew”? What are those trades?
• Tweet from VIXen - Why are iron condors so hot right now? Seems like everyone is selling them these days no matter the vol landscape.
• Email from Sam Felis: Why are the front-month VIX futures trading above the cash right now? I need the Vol Views pros to explain this to me.
• Tweet from Sam Dash: Don -- sell or don't sell vol in 2013? Give me your thoughts?

The Crystal Ball: What can we expect to see in 2013?

Volatility Views 73: Once More unto the Black Swan Breach Volatility Review: NASDAQ vol hits 13.08. Apple, despite its tremendous movement, is having little effect on NASDAQ volatility. S&P realized vol versus implied vol.

Listener Mail: Back to Black Swans.

• Comment from Asymmetric Risk: According to Don, Nassim will lose money over the long run because the out of the money options he buys have a higher implied volatility than the close to the money options he sells. Since he is paying a spread, Don thinks this is a bad strategy. Far be it for me to disagree with Don, but speaking for Nassim (and I feel confident speaking for Nassim because I've had dozens of conversations with him on this exact topic) Nassim would agree he is paying a spread but the spread between ATM and OTM options is systemically underpriced. Nassim's strategy is based on his belief that asset prices are not normally distributed -- the bell is flatter and the tails are fatter. So options markets overprice one standard deviation risk ("I always sell ATM straddles") and underprice two standard deviation risk (Black Swans). Your critique of him is misplaced because you're focusing on 5- and 10-sigma events which are not required for his strategy to work. He ran a large option book at a major investment bank and was profitable on a monthly basis.
• Tweet from Don M.: Shouldn't Nassim be a net buyer of tail puts if he feels tail risk is underpriced? If he sells ATM, does he buy OTM on a ratio? Make no sense to me.
• Email from Tim Vicks, Fredericksburg, VA: Let me see if I have this straight: Black Swans are extreme outlier events that are unpredictable, yet so catastrophic as to alter the course of human events. But the way to prepare for these events is to sell premium? What am I missing?

The Crystal Ball: Sebastian foresees a massive spike in realized vol with little to no spike in implied vol. Is it time to own gamma and be short vega? Still waiting for some news out of Washington.

Volatility Views 72: Closing the Book on Black Swans Volatility Review: It was a very slow week in volatility, with the VIX sticking close to 16. Near-term VIX futures were trading at 0.50 below the cash contract at one point this week. Listener Mail: Mark, Andrew, and Don answer listener questions.

• Comment from Teddy: This is a great article. I really hope you guys discuss this on the next episode of Volatility Views. I'm curious about this new low vol VIX. What is the point of it?
• Comment from Oscar (about Woodard's article): This is a good article, and given the last episode of Vol Views, this is very timely. When are you going to have Condors Options on the show? It seems like they would fit nicely with Mark, Don and Mark.
• Comment from Asymmetric Risk: I've never read any of Nassim's books, much less his research. However I've probably traded more options with him than any of his counterparties, going back to the 80's when we were the two most active currency options traders globally. I would describe him as a buyer of back spreads, and very well positioned for gaps or jumps. Many of which were not black swans per se, for example, the sudden 10% currency move we had when the Swiss National Bank put a floor on the Euro recently. Your critique of his strategy was unduly harsh, because while he is set up for black swans, he isn't dependent on them to be profitable, as you guys characterize him.
• Email from Mark S: Should I even pay attention to the vega numbers when trading weekly options? It seems like vol is mostly irrelevant in such a short-dated option and that any measurement of that vol would be highly prone to error. Weeklies seem to be gamma/theta beasts, so that's where I expend the bulk of my effort and analysis.

The Crystal Ball: We're still waiting for a settlement in Washington on "the fiscal cliff."

The Crystal Ball: We're still waiting for a settlement in Washington on "the fiscal cliff."

Volatility Views 71: Condor Options Takes on Black Swans Volatility Review: Near-term vol of vol has been extremely low of late. NASDAQ and S&P vol review: over the past two weeks vol has been almost unchanged. How has our frame of reference for vol changed? Volatility Viewpoint: Today's guest is Jared Woodard, the founder of Condor Options. He discusses his recent article about volatility and black swan events. What was the response from Taleb? A major bombshell is dropped. Plus, Jared also gives his take on volatility risk premium. The Crystal Ball: The fear of the weekend. What could happen with "the fiscal cliff"? Here is the link to the article on Condor Options' website.