Volatility Views 245: Volatility Disconnect

Volatility Viewpoint: This episode features a special guest: David Hait, Founder of OptionMetrics.

He discusses:

• A overview of Option Metrics and the Feb. 21 release on skew
• What is the flavor of choice for skew at Option Metrics?
• Why does he think we are seeing such a bid in VIX futures right now?
• How does this term structure compare to historical levels?
• What his your outlook for volatility under Trump?

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

• VIX Cash - 11.71, unchanged from last week.
• VVIX - 83.61, also unchanged from last week.
• CBOE Skew Index - 133.6. Front month premium to cash: 1.4, less than last week. Two month premium to cash: 3.25, slightly less than last week.

Russell's Weekly Rundown:

• VIX Options: A mild volume week. ADV - 575k. Mon - 437k, Tues - 455k, Weds - 492k, Thurs - 275k. Total 9.70m (7.04m Calls, 2.66m Puts)
• SNAP: The first big IPO of the year is off to the races. It was supposed to list at $17, opened at $24 and traded up to nearly $26.

Options Pop Quiz: If $SNAP opens at $17 what price would you give the ATM straddle expiring 3/10? AKA how much movement do you expect? (Our listeners totally called this one)

• 13% - Between $1 - $2
• 13% - Between $2 - $3
• 19% - Between $3 - $4
• 55% - Over $4 - aka over 23%

Volatility Voice Mail: Options #QuestionOfTheWeek

$VIX has already hit single digits under @realDonaldTrump. How low will it get during the rest of his term?

• 29% - It won't break 10 again
• 22% - Between 9-10
• 22% - Between 8 - 9
• 27% - Below 8

Question Number 2: $SNAP closed at $24.50. If #Options were available tomorrow would you rather:

• 45% - Buy 1 month $24 put
• 11% - Buy 1 month $25 call
• 19% - Stay the heck away
• 25% - I would rather sell premium

Listener questions and comments:

• Comment from Hawkeye - Mark, I call MAJOR umbrage for you taking credit for MY idea of calling Russell "Dr. VIX"! As you can see in the forwarded email below, I have it IN WRITING that I proposed that moniker for the good Dr. back on November 17, 2015. You should feel ASHAMED of yourself in your weak attempt to take credit for my idea, ESPECIALLY since I sat right next to you and Uncle Mike at the Lobster and Meatball fest in Chicago a couple years ago, eating tasty steaks on Sebastian dime. Have you no shame, sir? Is your memory that short? Umbrage! I hereby give you permission to send the residual checks to my PayPal account. On another note, here is another idea that you CAN keep: The business show should use as its motto The Business Show! It is an audio train wreck -- you cannot stop listening no matter how much you know you shouldn't. While I am at it, I really like Nick and the new revitalized Futures shows. Even though I do not trade futures options, I still use the concepts to trade some of the ETFs/ETNs. Get the Typhon guys back on and see if you can get the Viceroy and Don S. back on for a mega-reunion show sometime. Keep up the great work! Hawkeye
• Question from Kmar65 - Have you all covered the situation with Catalyst and the HFXAX fund recently? I try to get to all the webcasts but must have missed it if you had. Expected max drawdown was 5% and they blew through that. Gives one cause for pause re options strategies. would be great to understand how it happened and how it could/should have been avoided. Thanks in advance!

Crystal Ball: Your prognostication headquarters

Last week:

• Mark L. - 11.25
• Mark S. - 11.50
• Russell - 12.34
• Guest - 12.65

This week:

• Mark L. - 11.55
• Mark S. - 11.00
• Russell - 12.00