Volatility Views

Volatility Views 55: Good Volatility, Bad Volatility Volatility Review: The play between pre- and post-election Greek volatility has seen big action. Ultimately though, the EU will let the Greeks decided their own fate. Andrew G. does not want to own pre-election juice. Given realized volatility, there has not been much change in the NASDAQ. The three-month realized vol has actually risen somewhat -- replacing volatility that was extremely low just a short while ago. Volatility Viewpoint: Today's guest is Andrew Patton, Associate Professor of Economics and Finance at Duke University. He is the author or co-author of several academic papers, including "Good Volatility, Bad Volatility." Prof. Patton discusses some of its findings, including the importance of directional movement in forecasting future volatility. Crystal Ball: In VIX, Andrew G. is just waiting for the Greek election to sell June, buy July, and unleash the time spread. NASDAQ one-month realized may roll over a little bit. The short term might be dropping more, but that is not a ringing endorsement.

Volatility Views 54: Listener Mail Extravaganza, Part Two Volatility Review: NASDAQ one-month vol came in a little bit, and at the same time the three-month vol went up slightly. The risk premium between implied and realized volatility has widened further. A crazy scenario of implied vs. realized volatility in VIX. Listener Mail: Mark, Don, and Mark take on listener questions.

• All of this talk about JP Morgan has left me wondering, what kind of derivatives hedge loses $2.3 billion? How is that even possible? Help me Volatility Views hosts, you are my only hope! (Todd Lundgren, Pittsburgh, PA)
• I Know Bob and Don are big fans of vol cones. How about a vol cone update on the major indices (VIX, NASDAQ, Euro, etc.) for your loyal listeners? Where should I be buying, or perhaps not buying VIX here? (TEDMAS via Facebook)
• Hey Don, what index is next from VolX after NASDAQ? Russell? Emerging Markets? Thanks. (Via Twitter from UNCLESTEVE)
• Mark is fond of calling NASDAQ "Apple Plus." I know he's joking, but it raises an interesting question about how much the Apple tail is wagging the NASDAQ dog? What percent of NASDAQ vol, or even vol of Vol, is directly attributable to Apple? I'm sure your listeners, me included, would like to know. Also, quick side question for Mark - Is there any way to buy Options Insider gear? I love the logo and I want to do my part to get the word out about the network. (Steve K., Oklahoma City, OK)
• Vol crew, why is the VIX term structure coming in so dramatically? The VIX ETPs and annuities are still net buyers of long-term vol. (Max Shreck, Atlanta, GA)
• Has the rise of weeklies rendered existing vol studies, and maybe even conventional vol wisdom, moot? (Via Twitter from Todd Dupres)

Crystal Ball: We might start to see levels of realized vol taper off a bit in NASDAQ. The three-month vol of vol is actually lower than the vol of the S&P itself. VIX could reach 30 sooner than later. Bonds are in even worse condition.

Volatility Views 53: An Insider's View of Risk Management Volatility Review: There is an extra note of tension in the market with S&P vol waiting for the other shoe to drop. NASDAQ vol is slightly higher. JPMorgan news does little to rattle VIX. Volatility Viewpoint: Today's guest, Todd Petzel, the Chief Investment Officer at Offit Capital, sits down with Mark and Don, and discusses myriad aspects of volatility and risk management. Topics include:. The instruments he uses to manage portfolio risk. Structured VIX products. Go-to products. Financial investors and their lacking use of options. Pending regulations concerning position limits Crystal Ball: Sebastian sees the market bouncing around in the short term. A safe trade may be shorting U.S. treasuries. There is still a continued contraction between implied risk premium and realized vol levels. Vol may go higher, but without anything dramatic moving it.

Volatility Views 52: The Father of Financial Futures Volatility Review: Listeners from last week may remember Don made a timid prediction that the realized volatility of NASDAQ could be going a bit higher, and it managed to inch up a few basis points. It was a strong down week for equities. Since this selloff was gradual, the actual market volatility was not significant. Greek and French elections this weekend may fuel some volatility moves next week. Volatility Viewpoint: Today's guest is Dr. Richard Sandor, "the father of financial futures," and Chairman and CEO of Environmental Financial Products. Dr. Sandor discusses his new book "Good Derivatives," and his storied career. He distinguishes between regulated and unregulated derivatives, discusses what it takes to create a new market, and his involvement in the issue of acid rain. Crystal Ball: There may be an increase in realized volatility on NASDAQ in the next week. Putting a cap on volatility at 20%. Upcoming elections in both France and Greece.

Volatility Views 51: Risk Managers: The Adults in the Group Volatility Review: VIX options were absolutely crushed this week. Apple after earnings and its effect on NASDAQ vol. Don and Sebastian weigh in on VVIX. Volatility Viewpoint: Volatility Views welcomes back Euan Sinclair, author and risk manager at Bluefin Trading, to discuss risk management and his work on the barrier (or first time) method for calculating volatility. Euan gives a quick sneak preview of the updates to his book. The group also discusses Euan's opinion on vol of vol, and if the universe of ETPs has dramatically affected the vol of vol. Crystal Ball: Sebastian is looking at a 14-handle in the VIX and observed that S&P realized volatility was already in the 14s and would probably maintain those levels. Now that Apple's earnings are out of the way, what to look for in the NASDAQ? Getting close to the summer doldrums.

Volatility Views 50: Listener Mail Extravaganza Volatility Review: NASDAQ (aka Apple+) is starting to see a rise in realized volatility, as had been anticipated. VIX looks like it is settling back into a range, so we will have to see if it holds where it is or moves yet again. We seem to be in flux; there's no real trend here. Listener Mail: Via email from Tim Siffron, Lansing, MI.I love your show and the great guests you guys manage to wrangle, but I was a little out of my depth with last week's guest. It's been a while since I took a stats course, so your discussion of jump frameworks and stochastic volatility models for pricing OTC variant swaps was a tad out of my league. Can you give a quick, plain English summary of the take-aways from that discussion, for those of us who may have had trouble following along? Thanks and looking forward to the NASDAQ contracts. Via Twitter from Joe X4.Mark and Don: Who is your favorite Vol Views guest so far? Love the show. Via email from Aston VaLance, Hoboken, NJ.Mark L, Mark S and Don: Now that you are discussing NASDAQ vol on the show, do you find that it performs dramatically differently from S&P vol? If so, how much of that difference do you attribute to the relative dearth of NASDAQ vol products versus the explosion of S&P volatility ETPs? Mark L has said many times on the show that the VIX has many masters these days, not just SPX front-month volatility. On the flip side, it seems that NASDAQ vol only has one master. Are these various masters pulling the VIX in different directions from NASDAQ vol? Also, would the lack of NASDAQ vol ETPs "polluting the waters" make NASDAQ implied vol a more pure product from a volatility perspective? Via the Options Insider forum, from Captain Options.What causes VIX term structure? Mark L, Don and company: The Vol Views show has discussed the term structure of VIX futures many times in the past; most recently the emphasis has been on the incredibly steep slope of that term structure. I wonder if you could voice your opinions on what you think is actually causing such a steep slope in that product. As my handle suggests, I am more of an options guy than a futures guy, so I'm not particularly familiar with futures term structures and how they should work. I hope my question isn't too remedial for this esteemed panel. And Don, may I say, "Sold to you." Wow. That felt great! Crystal Ball: NASDAQ volatility at nearly historic lows, which Don predicts will rise over the short term. However, he did not say "buy 'em." Remember his motto re options: "Sell, or don't sell." Sebastian discusses shocking bond movement, earnings season, and Apple.

Volatility Views 49: How Best to Price Variance and Volatility Swaps Volatility Review: It's funny how it didn't take long for our prediction of a range-bound VIX to be proven wrong! The VVIX has been high. Is a tradable VIX of VIX in the works? What have the NASDAQ and SPX vol of vol six-month averages been? One-year? Don gives some remarkable numbers. Apple on the move downwards; some are eager to buy Apple at 600. NASDAQ vol cones, like most volatility readings, are at historical lows. Volatility Viewpoint: Today's guests, Thomas Thorsen and Emil Stamp, are the authors of the master's thesis, "Pricing of Variance and Volatility Swaps in a Stochastic Volatility and Jump Framework." The gang discusses pricing models of OTC variance swaps, the different models the authors created, and the accuracy of the models for both forecasting realized volatility, as well as pricing of variance swaps and GARCH models in real-world applications. Crystal Ball: Are you still shorting the VIX? Are higher levels forecasted for the future? Perception versus reality.

Volatility Views 48: Masters of the VIX Volatility Review: Not much vol action to report with the markets closed on recording day (Friday). Steep contango in VIX futures has lessened in the past few weeks. Long holiday weekend volatility didn't fully come out of VIX futures and index options, which is highly interesting and unusual. Also an unusual situation -- unemployment numbers were released on a day when the market was closed. Don and Mark discuss contango. NASDAQ volatility update. Volatility Viewpoint: Mark and Don are joined by David Palmer, Volatility Book Portfolio Manager at Hudson Bay Capital. They discuss the evolution of skew, the growing market of products tied to VIX, and how they're manipulating the underlying, the halting of TVIX share creation, OTC versus listed trading, volatility arbitrage opportunities, rational arbitrage, and hedging and downside protection. Crystal Ball: Nothing to rant about in S&P land, at least until we reach the next unknown unknown. Summer doldrums are coming. The impact of having such low levels of realized volatility.

Volatility Views 47: How Dynamic Volatility Can Reshape Your Portfolio Volatility Review: VIX review, with interesting corresponding elements relative to VIX and VIX skew. Monday massive overreaction to the market rally. NASDAQ vol review, driven by AAPL, which is slowing down a bit. Volatility Viewpoint: Mark, Bob, and Mark are joined by Peter Christoffersen, Professor of Finance, Rotman School of Management at the University of Toronto, and author of Elements of Financial Risk Management and a chapter in the forthcoming Handbook of Economic Forecasting. Prof. Christoffersen discusses dynamic volatility, the Sharpe ratio, and practical applications for the average investor. Mark asks Prof. Christoffersen whether it's possible to have a truly diversified portfolio without having some kind of volatility asset. He also discusses his research on skew and its impact on the underlying instrument. Crystal Ball: Looking deep into the murky ether of the future of volatility, Mark and Mark pontificate on the contango environment of VIX futures, with Sebastian seeing VIX staying between 14 and 17. Will AAPL vol come in? As AAPL goes, so goes the NASDAQ. There might be an increase in volatility post-Easter, with the beginning of earnings season.

Volatility View 46: Volatility Discussion with the Godfather

Volatility Review: Slaughter of the VIX April future, with May poised for the same. Credit Suisse released more creation units and TVIX crushed long positions - going from 13 to 6.5 in a week. Euro vol review -- March 1- and 3-month contracts expired last week. NASDAQ vol update.

Volatility Viewpoint: Mark, Bob, and Mark have the great pleasure to discuss volatility with the Godfather: Anthony Neuberger, Professor of Finance at Warwick Business School. The gang discusses his seminal paper, "The Log Contract and Other Power Contracts.” They also discuss tail risk and skew risk. Mark asks Prof. Neuberger if the market is correctly pricing in tail risk.

Crystal Ball: Sebastian sees VIX staying between 14 and 16, with a lot of erosion in VXX. Watch out for contango. Euro vol is a coin flip right now. NASDAQ vol might be too expensive right now because of Apple.