Volatility Views 283: Trump, Russia and VIX Explosions

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

The numbers:

• VIX Cash - back above 12, briefly
• VVIX - 90
• CBOE Skew Index - 131
• VIX Options: ADV - 725K, VIX call/put: 3.7, Total 11.2m (8.68m Calls, 2.56m Puts)
• VXX - 32
• XIV - 109.58

Volatility Voicemail: Options question of the week

SPY always dominates the Options volume charts. But what do you think people are actually trading in SPY? Take a guess at the Top OI position in SPY right now. No cheating (or checking with your broker) - use your grey matter & your "gut" to pick the right one.

• Jan 262 Call
• Dec 2019 150 Put
• Dec 280 Call
• Jan 240 Put

Listener questions and comments

• Question from FContangotrader - I think we have a winner today in TA of $VIX world.
• Question from CConden - Looks like the winning trade for past few years has been rolling short VIX front month future with a protective call kicker should the worst come to pass. I'm stuck on the call kicker strike. What is the ideal strike/month combo for max gain with protection against apocalypse? Don't want to pay too much for call but also don't want to get run over by the VIX train.
• Question from Mantauk - What is the actual implied volatility of bitcoin?
• Question from VonBaron - Seems like Whaley doesn't think people get his creation like they should.

Whaley: I don't think people understand it as well as they should. The VIX doesn't trade. It's just a number produced from these 250 S&P 500 option prices. But what does trade are the VIX futures and the VIX options, which are related to VIX but in a strange way. Where VIX is the volatility over the next 30 days, VIX futures is the expectation of the volatility 30 days from now. Those two series don't behave like one another, in fact quite differently. VXX is incredibly actively traded. Would I have thought it would be this actively traded? No, but it is. I think the VIX futures index is particularly staggering. It probably trades more shares in a day than Microsoft. If you look at the turnover ratio, you'll find that it's a huge number. If people were just buying and holding, that number would be much lower.

Crystal Ball: Your prognostication headquarters

Last week:

• Mark L. - 9.75
• Mark S. - 9.99
• Russell - 10.59

This week:

• Mark L. - 10.25
• Mark S. - 11.25