Volatility Views

VOLATILITY REVIEW VIX Cash - 13.34 Russells paper link: https://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/accounting--finance/Park-PriceDislocationandPriceDiscoveryintheSP500OptionsandV....pdf VIX Options Strong volume on Tues, 10/18: 780k, but light volume the rest of the week. Total 4.30m (3.24m Calls, 1.05m Puts) The VIX: Not so fearsome after all? - by David Hait http://blogs.barrons.com/focusonfunds/2016/10/21/the-vix-not-so-fearsome-after-all/ VOLATILITY VOICEMAIL Question from Avery - I found the discussion and the "point" made by ThinkTankTrading extremely confusing. Is this really something to worry about or, as Mark suggested, is it really a distinction without a difference? VXX erodes predictably. Does it really matter if its is caused by roll yield or stampeding elephants? Question from Tom from NYC - Love the Vol Views. Been thinking about that 1x2 call vertical in VIX. Would flipping the script also work? So instead of selling 1 buying 2 calls you would BUY 1 ATM VIX PUT and then Sell 2 OTM VIX PUTS. You could capture a downside move in VIX without spending a lot. While you are short an extra VIX put you would not have the same worry of being short a VIX call because the downside risk of VIX is limited. Thanks and hope you read my question. Question from JonasBro - What does CBOE acquisition of BATS mean for the future of SPYIX? Is it dead? Also an update please on VolDex and VIXUP / VIXDN? CRYSTAL BALL Last Week: Ghost of Mark S - 9.99, Mark L. - 13.50, Russell - 17 This Week: Mark S. - 12.5, Mark L. - 13.75, Russell - 13.3333

Volatility Review: VIX cash/futures finally connect: we've been wondering for the past few weeks whether VIX cash would rally to the future or the future would drop to the cash. We finally have our answer. Oh, and VXX is NOT VIX. Volatility Voicemail: Listener questions and comments Question from Bill Chace: Hi Russ. What indicator do you use to help determine future movements of VIX? And how reliable are they? Question from Bobby: I've noticed moves in the currencies lately. Is this increased volatility good for premium sellers in currency options? Question from Vegan: Do you use VIX as a relative strength indicator vs. ES? What tends to lead the dance: S&P or VIX? Comment from Itzprav: VIX will be back to 11 next week - referring to headline "How high will the VIX get?" Comment from Highlander: Yes, it's only $46 Trillion backing mortgages & loans for hundreds of millions of people. It'll be fine. Question from LV87: Single name VIXes. What's up there? Can I actually buy Amazon VIX? Question/comment of the week winner!!!!: dmcxkxjzpo Commen from Kid Sinclair: When does your new album drop? :) I love your latest single "F**k a maintenance call" was that inspired from Brexit? Comment from Mark Brandt: VIX reverse investment skew is a gold mine if you can see the big picture Question from Billivanilli: I'm a bit confused. Why do so many people trade that 1x2 call spread in VIX? Seems like you guys discuss it on every show. Is it really that effective? What am I missing? Crystal Ball: Wild prognostication This Week: Mark S: 9.99 Mark L: 13.50 Russell: 17 Last week: Mark L: 12.25 Mark S: 12.75 Guest: 12.98 Russell: 12.95

Volatility Review featuring Mike Thompson, Portfolio Manager, Typhon Capital What is up with VIX term structure? How is Typhon Capital working with this contango? Hint: reverse mullet, AKA Tellum. Russell's Weekly Rundown CBOE Holdings reports September 2016 trading volume: Total ADV Up 25% from August 2016, 3% from a year ago. Highlights: September Index options traded at CBOE and C2 had an ADV of 1.8 million contracts, up 24 percent from August 2016. SPX options ADV of 1.1 million contracts up 26 percent from August 2016. New Study: CBOE and Fund Evaluation Group, LLC announced findings from a study of four CBOE strategy performance benchmark indexes designed to track the performance of positions in Russell 2000 (RUT) index options. VIX Cash: Back below 13 handle. When might we see #Trumpocalypse? How would a Cubs World Series victory impact the VIX? Volatility Voicemail: Listener questions and comments Comment from AlphaJack: Cool piece in Barrons about XIV. Reminded me of what you guys always talk about with these inverse products and the roll risk. Short Term only! Buyer beware! Worth discussing on a show? Comment from ThinkTankTrading: The VXX roll yield is a net neutral roll and the drag is from the rest of the holdings decaying down the curve. VXX roll is like trading a dollar for four quarters they are rolling notional values not equal contract amounts. If the roll yield caused the drag Barclays would be broke. 1/30th roll isn't the issue it's the 29/30 that's now decayed. https://sixfigureinvesting.com/2016/09/the-cost-of-contango-its-not-the-daily-roll/ Question from Jim Collins: Are transcripts available for Russell's interviews? (after last episode when talking about CBOE/RMC) Crystal Ball: Prognosticating and speculating Last week: Mark L. - 12.6 Mark S. - 14.5 Russell - 13.70 This week: Mark L. - 12.25 Mark S. - 12.75 Mike - 12.98 Russell - 12.95

Volatility Review: CBOE just concluded the Risk Management Conference in Europe. They will soon introduce the CBOE S&P 500 Smile Index. At the event, they released a new study of of four CBOE strategy performance benchmark indexes designed to track the performance of positions in Russell 2000 (RUT) index options, looking at various aspects of their performance over a 15-year period spanning 2001 through 2016. Russell gives a rundown of the new products coming your way, themes overheard and the event, and more. What else happened in the market this week? Deutsche Bank debacle. Russell's Weekly Rundown: VIX Weeklys and harvesting volatility Is the Deutsche Bank issue just a reissue of Bear Stearns from 2008? Crude oil vol spiked to 45 earlier this week. Calls are finally springing back to life leading into the OPEC announcement No one wants gold premium Volatility Voicemail: Listener questions and comments Question from Mort: My question is: In terms of SKEW, how do you think about the difference in CBOE SKEW and CSFB. At it's simplest, it appears CBOE is 30 day and CSFB is 3 month measure of demand for downside protection vs upside calls. Other than the difference in time-frame, how should one think about the two as indicators of market sentiment? Comment from last week's show: What flavor would a $VIX slurpee be? @Emanuel_Wynne: Is worthless a flavor? Options #QuestionOfTheWeek: How will the election impact $VIX? Are we heading for #Trump-ocalypse or #Clint-astrophe? Share your feelings. Spike > 20 - Blame Trump Spike > 20 - Blame Clinton No impact (12-14 range) Modest Increase (15-20) Crystal Ball: Wild prognosticating Last Week: Mark L. - 11.60 Mark S./Andrew - 12.25 Russell - 13.40 This Week: Mark L. - 12.60 Mark S. - 14.50 Russell - 13.70

Volatility Review: A look back at the week from a volatility perspective VIX cash: Janet & Co. crushed vol. VIX cash back in the toilet, but futures are still rich 30-day HV: 11 30-day IV: 10 VXX: Futures setting up for a VXX implosion VVIX: at 89, or 20 handles lower than last week Russell's Weekly Rundown: 1000-lot VIX weekly trades creates a synthetic VIX collar Two-way action in the VIX Sep28 13 calls The week in VIX volume: Monday: 546,000 Tuesday: 661,000 Wednesday: 727,000 Thursday: 751,000 Crude OIV/OVX: 40. Same as last week Gold GVZ: 13.73. Close to a 52-week low Volatility Voicemail: Listener questions and comments Comment from Jim Investor: Shortsighted market over focused on Yellen. Soon they eye Trump widening lead in battleground states Comment from John King: Since #SPX has 15+ "non-standard" expirations/month VS 1 "standard" -isn't it time @CBOE truly standardizes the monthly? Comment from Mark Brant: Sell VIX 2M CV (X+5) (X+9) daily thru settlement (regression). X=ATM. Risk 1% $4 daily. Sold today's SPX IB wide 4X every 10 points today! Dailies rock! Comment from ThinkTankTrading: all right,- first my question gets on volatility voice mail, Next the world muhahahaha evil laugh. Crystal Ball: In which the VIX giveth and taketh away Last week: Mark L. - 11.75 Mark S. - 12.50 Russell - 12.99 This week: Andrew - 12.25 Russell - 13.40 Mark L. - 11.60

Volatility Review: A look back at the week from a volatility perspective VIX Cash: High of 19.12 earlier this week. 30-Day HVOL: 11; 30-Day IVOL: 14 VVIX: Currently at 109 with a high of 116 this week Russells Weekly Rundown: VIX Options: A very active week. Mon - 951k, Tues - 1.3M!, Weds - 656k; Total 8.06m (5.62m Calls, 2.44m Puts) Crude: OIV/OVX: 40 - Retreating from a recent spike up to nearly 46. Gold: 30-Day HVOL: 10.7% - Near the bottom end of the 52 week range. 30-Day IV: 15% - Only in the 23rd percentile Volatility Voicemail: Listener questions and comments Question from Erik Leland - Saw VIX 1x2s going up this week. Is it that season again? Question from JVac - What about a mini VIX option? Question from TC - U.S. has VIX. Europe has VSTOXX. What is the Asian equivalent? Nifty VIX? It hardly seems comparable. Is there a Chinese or Japanese Vol product? Question from CVortt3 - This guy says you should ignore VIX. Agree? Please discuss on Vol Views - http://etfdailynews.com/2016/09/16/heres-why-investors-should-ignore-the-vix/ Question from ThinkTankTrading: Can you ask Russell Rhoads why he blocked me? That is my question for your show. Thanks in advance Crystal Ball: Reckless prognostication Where will the VIX close this week: Mark L. - 15 Mark S. - 15.75 Russell - 16.5

Volatility Review: A look back at the week from a volatility perspective VIX Cash: Back above 12; 30-day HV - 5; 30-day IV - 11 VVIX: 85 Russell's Weekly Rundown: Interesting trade in the weekly VIX options. VIX Options: Truncated trading week Crude Oil: Mixed signals this week. WSJ: Crude stock drop sparks rally. Volatility Voicemail: Listener questions and comments Question from Joshua Shealy: Thanks so much for all that you guys do! Sorry if this is a novice question. I know that Delta is not literally the % chance of expiring in the money, but more so the rate of change for a $1 movement in the underlying. I noticed today (8/26/16) looking at VIX Dec Calls that the strike closest to .5 Delta is the 20 strike, a long way from ATM. I usually associate near .50 Delta with being near ATM. Is this just a nuance of VIX, or am I missing something bigger? Thanks! Question from Dr. Larry: Hi Mark. Andrew mentioned buying stocks and buying covered long term puts when IV is so low. I wonder your opinion on my favorite low Vol strategy: Buy ETFs, preferably non-correlated underlyings and some with dividends. Example: DIA, SPY, TLT, GLD, multiple sectors, foreign markets… I then buy the longest dating LEAPS available with strikes 5% under current price of underlying. I then sell covered calls every 30-60 days that are one to two strikes or 3-5% or more, out of the money. Management: ETF stays same, roll short calls out. ETF goes up a little, roll short calls up and out. ETF goes up a lot, called away, re-establish covered call, roll leap up. ETF goes down a little, roll short calls same or down strike assuming still above leap strike. ETF goes down a lot, take profit on leap, re-establish lower strike leap, roll short call down but above leap strike 1-year later, roll Long leaps out one year if IV still low. Close positions if IV is high and wait for lower iv again. I add to positions monthly by buying diagonals, long LEAP, short at the money call and either get assigned on short call, or roll short calls. If and when IV goes up my long puts make more or lose less, and I can sell more call premium which covers the entire price of my long puts after a few rolls. Sorry for long email. I hope you can discuss on the air. While I listen to almost all shows I occasionally miss due to work obligations. Can you alert me of when it airs if you discuss this? Thanks. Dr. Larry in NYC - PS: tell Sebastian he never returned my call. Question from Joneil: Heard someone talking about the VVIX/VIX ratio. Did not make much sense to me. Is that something you guys track? Crystal Ball: Wild and reckless prognostication Last week: Mark L. - 11.75 Mark S. - 12.50 Russell - 12.99 This week: Mark L. - 14.5 Mark S. - 13 Russell - 17

Volatility Viewpoint: Today we have a very special guest, Ricardo Manrique, Executive Director of Index Business Management and Derivatives at MSCI. He discusses: An overview of MSCI Inroads into options and volatility, especially through CBOE partnership Meeting investor demand for products related to international equities How does Russell incorporate these indexes into his analysis? Will there be futures listed on the idexes? Domestic versus international companies Listener questions Volatility Review: A look back at the week from a volatility perspective VIX cash: Remained above 13 most of the week primarily due to impending non-farms. 30-Day HVOL: 5; 30-Day IVOL: 12 VIX Futures: Oct premium 3.3. points to cash, down from 5 points a few weeks ago. Russells Weekly Rundown How are the Monday SPX weeklies fairing? VIX Options: Mon: 192k, Tues: 205k, Weds: 276k, Thurs: 309K; Total 6.86m (4.80m Calls, 2.06m Puts) Crude Oil: Crude taking in on the chin again this week. OIV/OVX: 41 Crystal Ball: Predicting and prognosticating. This Week: Mark L.: 11.75 Mark S.: 12.50 Russell: 12.99

Volatility Review: A look back at the week from a volatility perspective VIX Cash: Spiked over 14 this week thanks to Yellen & Co. What will remain of vol after Yellen!? 21-day S&P realized Vol as of Wed. was 4.92. Buy volatility ahead of a jam-packed 'Policy Month,' says Bank of America/Merrill Lynch. VIX Futures: Futures extremely rich with significant premium to cash. Oct future $5 premium to cash last week. VVIX: 85.43 Russells Weekly Rundown Featured VIX Weekly trades: An anemic volume week: Mon., 362k, Tue., 415k, Wed., 615k, Thu., 290k, Total 6.43m (4.58m Calls, 1.85m Puts) Earnings Volatility: HPQ Paper bought about 25,000 HPQ Sep. 16 calls for $0.10. Stock down post-earnings. Sep. 16 calls now offered at $0.02, still 25k open on the strike. Crude Oil: USO = 10.95 OIV/OVX: 37: Less than half of peak levels back in Feb. USO Skew: Still bid toward the puts, with the exception of Jan 17. Gold Crystal Ball: Where will the VIX close? This week: Russell - 11.90 Andrew - 12.10 Mark L. - 11.50

Volatility Reivew: A look back at the week from a volatility perspective VIX Cash: Spiked to nearly 14 this week before dropping back below 12. VIX Futues: Crazy term structure a hot topic last week. Follow up question from JJK: Thanks for discussing my question on the show last week. If anything it seems like the futures premium to cash has increased with futures premium to cash has increased with Oct future 5 handles above cash. What am I missing? Earnings season is done and FOMC in rear view mirror for now. Is this just pricing in unease over current market valuations? VVIX: 82.83. Well off levels from last week. Russell Weekly Rundown How was the first week for Monday SPX Weeklies? VIX Options: Mon 501k, Tues 526k, Weds 570k, Thurs 481k, Total 5.40m (3.72m Calls, 1.68m Puts) Options #QuestionoftheWeek: $VRX $26.66 up 7% Monday. IV30 is 63. HV30 is 99. Looking out one month would you rather Buy Calls? Buy Puts? Sell Premium Sill not touch $VRX Crude Oil: OIV/OVX 35: Less than half of peak levels back in February. Volatility Voicemail: Listener questions and comments Comment from Mark Brand: Really excited about SPX Mondays! Like TGM said on VV, great weekend risk trade or fade! Question from James Aldo: Re: Circuit breakers talk last week. Is i correct to assume that circuit breakers that are too tight can actually increase volatility? Or is that a myth? Crystal Ball: Where do the hosts think VIX will close this week? Mark L.: Was 11.25 last week, sticking with it. Russell: 11.75 Ghost of Mark S.: 7.7