Alpha Exchange The Opera of Option Prices
8 snips
Oct 9, 2024 In a recent discussion, the hosts tackle China's bold economic measures and the resulting 'volatility shot' that shook global markets. They dissect the characteristics of price and volatility spirals while analyzing their implications. The conversation also touches on the current political climate in the U.S. and its influence on market dynamics, especially concerning VIX fluctuations. Strategies for hedging investments amid growing uncertainties are a key takeaway, inviting insights from the audience on governance and skepticism in politics.
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China's Vol Shot
- Dean Kurnutt analyzes China's market volatility, focusing on the "vol shot" and its impact on option prices.
- He uses the FXI ETF as a case study to illustrate the five key characteristics of these volatile episodes.
Five Characteristics of Price/Volatility Spirals
- Dean Kurnutt describes five characteristics of price/volatility spirals: inverted term structure, inverted strike skew, higher realized volatility on up days, positive spot-vol correlation, and surging call volumes.
- These observations are made in the context of the recent volatility spike in Chinese markets.
Soros's Bubble Approach
- Dean Kurnutt cites George Soros, "When I see a bubble forming, I rush in to buy, adding fuel to the fire."
- He explains how this behavior fuels market momentum and discourages short-selling.