Volatility Views

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.

Volatility Views 69: Unlocking the Secrets of the Vol SurfaceVolatility Review: The post-election selloff seems to be over for now. A bit of politics, plus a two-week rundown of S&P and NASDAQ vol.Volatility Viewpoint: Today's guest is Alberto Cherubini, the founder of EQ Finance, who discusses volatility surface models, exotic trades, as well as OTC vol and how it is impacting that of listed products.Crystal Ball: We are hoping for a major announcement, any day now, concerning VolX. Stay tuned. Assets with inelastic demand and sensitivity to the US dollar will rally.

Volatility Views 68: The Dark Art of Futures OptionsVolatility Review: NASDAQ vol and how it has been affected by earnings. Implied risk premium. S&P vol.Volatility Viewpoint: Today's guest is Jeff Lewandowski from Foremost Trading. He discusses his transition from CBOE to futures, as well as the odd shape of commodity volatility skew, smile skew, and premium levels.The Crystal Ball: NASDAQ vol going into the big numbers tonight ahead of AAPL earnings. How will earnings affect realized vol? All the big tech names are outperforming. Looking ahead to S&P vol.

Volatility Views 67: VolContract Futures Overlays: The Holy Grail?

Volatility Review: What's going on with the VIX rallying on a slow day like today? NASDAQ rundown. This is the first time we've moved down more than 1% since June 26th. Volatility Viewpoint: Today's guest is Nick Li, a Quantitative Analyst for VolX. He tells us about the paper "VolContract Futures Overlay on an S&P 500 Portfolio," which compares some different implementations of VolContracts in conjunction with an equity portfolio. The Crystal Ball: Realized volatility should tick up a bit, but it depends on earnings.

Volatility Views 66: A Week without VolatilityVolatility Review: The week in vol that never happened. Yes, it was a very quiet week. NASDAQ and S&P both dropped off severely since the last week.Listener Mail: Our listeners drive the bus for a while

• Did Don start off as a vol seller or did he have a few losing long vol trades first that turned him to the dark side? (Via Tweet from @THIMSTER)
• Do you guys subscribe to the notion that the market is fully hedged with VIX, which is why VIX is underperforming? (Via Tweet from @XZTON)
• Does VolX have any plans to launch any realized volatility products on commodities such as ags, metals, etc.? Thanks and keep up the great work. (Via Email from Sid K., Des Moines, IA)
• What do you guys think of Apple call verticals here? Does Apple skew make buying them more attractive going into earnings? (Via Tweet from @Duncan6)
• Why is NASDAQ historically a more volatile index than the S&P500? Is it simply because it contains more tech stocks, so that generates more volatility than large Fortune 100 type stocks? Also, can you recommend any good products for trading NASDAQ volatility? Thanks for answering my question and for this fantastic, one-of-a-kind program. (Via Facebook from Alexander S.)

Crystal Ball: Looking ahead at VIX, NASDAQ, and S&P. Less than a month away from the general election.

Volatility Views 65: Contango Tango

Volatility Review: The VIX is back at 14. We're definitely in a lower volatility environment. The May futures are currently trading around 24, which is almost three times current S&P realized volatility. Not much movement in NASDAQ. Volatility Viewpoint: Today's guest is Mike Cavanaugh, president of Know Your Options, Inc. Mike talks about hedging stock portfolios with options and volatility products, the trouble with opening rotations, and more. Crystal Ball: Don't expect much to happen in the next week or so. Non-farms and the VP debate upcoming.

Volatility Views 64: Missing the Fat, Juicy Puts of YoreVolatility Review: Looking back at a four-day time horizon. At this point, most of the indices are unchanged on the day. Don starts us off reporting that we saw actual movement in realized vol for both NASDAQ and S&P. NASDAQ components making the index rather interesting. (Yes, that means AAPL.) S&P implied vol being driven by the European cocktail of news of the day. Does skew have it all wrong? Andrew sees a floor in VIX around 13.Volatility Mailbag: The team lets the listeners steer the conversation.

• Email from Michael: "Does volatility play a role in dividend exercise/assignment? Is Vega a major factor in most dividend scenarios?"
• Tweet from Ian K: "Can you talk a little about commodity volatility skew? Why is it so different than equity skew?"
• Facebook question from Christian Garcia: "Is it worth it to be stuck on the screen all day with regard to gamma scalping? Does Mark Sebastian's formula (pay-to-the-decay) work on futures options?"

Crystal Ball: The team attempts to peer into the murky ether of upcoming volatility.

Volatility Views 63: The Low End of the Volatility Spectrum Volatility Review: Vol didn't get a boost going into the weekend, but it didn't sell off either. Very dull week in NASDAQ. Listener Questions: The listeners direct the conversation.

• Comment from Lee on Mark Sebastian's "Arrogant VIX Trade" story: "Possibly one of the most honest and transparent posts I've seen about a losing trade and the reasoning behind it. Well done and thanks for the honesty. We have all been there, fighting a losing battle because our head tells us we are right when everything else is telling you otherwise. It really highlights the need to follow a plan, stick to you risk reward no matter what happens and act like a robot with no emotion when trading. Regards, Lee"
• Facebook Question from Tom Sevens: “You guys are always talking about the implied volatility premium vs. realized. But it seems like implied vol is always priced at a premium to realized, so is there ever a reason why anyone would want to do the opposite trade - buy implied and sell realized vol?”
• Tweet from @GIN4: “Are there any products out there that replicate vol trades (straddles, iron condors, etc.) to save me the hassle?”
• Email from Ed S.: "I really want to understand option volatility. I have even subscribed to sites that ANALYZE volatility, but I can never figure out what to do with the number it generates. I don't know if the result is particularly high, medium or low. This is very distressing to me, because I know vol is very important. But it simply eludes me. Your help is appreciated."
• Tweet from @TOMOTON: “Both Marks slammed buying 20,000 Feb 70 VIX calls for $0.15. What trade would you prefer to see?”

Crystal Ball: Looking ahead to a slow upcoming week in vol.

Volatility Views 62: Bad Money ManagersVolatility Review: The team takes a moment to discuss the problem with buying a put versus selling the stock and going to cash. Big events to move vol this week, including Apple iPhone 5 launch.Listener Mail: Letting the listeners take control of the conversation.

• I loved last week's show. I'm very glad to have Vol Views back in the saddle!
• My financial advisor recently recommended that I allocate a portion of my portfolio over to VXX because "VIX is low." I didn't know what he was talking about. When I Googled VXX I came across this program and have learned quite a bit. Thank you for informing me, but I'm still uncertain as to his VXX recommendation, especially after hearing your comments about TVIX. Should I allocate some of my portfolio to VXX?
• Why are VIX cash and front month VIX futures the same right now?
• Don - Is there ever a case when you would buy vol?
• You guys are always talking about Volatility skew. I recently noticed that, in Apple, the calls were bid substantially over the puts. Is that an unusual phenomenon? Are there any other names you can mention where this is the case?
• Are there any tools that let you trade off of vol cones?

Crystal Ball: Looking ahead to next week's VIX cash and VIX futures. NASDAQ preview.

Volatility Views 61: A Short Straddle for CowardsVolatility Review: Vol review from the last few weeks. Short story: vol has marched downward to near-record lows. Volatility Viewpoint: This week, Mark and Don are joined by Dan Passarelli, Market Taker Mentoring. Dan discusses Market Taker and how he approaches volatility with a new client. He also talks about mentoring students who want to dive into sophisticated vol products, like VIX options, for example. Does he counsel the novice trader to avoid these products? How does he train students to be aware of volatility levels for each trade that they make? They also discuss gamma scalping and delta neutral trading, and where Dan falls in the volatility hedge vs. direct hedge debate.Mailbag: Answering listener mail.. When is Volatility Views coming back live?. Someone bought 20,000 Feb 75 calls in the VIX yesterday. That's near the ultimate all-time high for the VIX. Why do so many people dramatically overestimate VIX, particularly to the upside? People seem to be ignorant of the historical range of VIX, let alone the typical VIX movement. Perhaps this is more of a comment than a question, but it's been bothering me lately and I wanted to hear your learned opinions on the matter.. Is there such a thing as "the gamma of vega"? Crystal Ball: NASDAQ vol outlook.