Volatility Views

Volatility Views 138: The Action Is In Oil Volatility Review: The week in vol   VIX Cash: High: 14.75 - Low: 12.09 VIX Options: Total 5.71M (3.84M Calls, 1.86M Puts). VIX shunned as few bumps seen for S&P 500 at years end. International Vol review: Its official - America is now No. 2 Oil Volatility: Oil futures slide on Saudi price cut to U.S. Gold Volatility: Hard to be a bull in this gold market.   Listener Mail: Listener questions and comments Question from Michael Roberts - I came across your program while looking for new diversification options for my clients. I find your suggestions about collars and protective puts very interesting. I have also been reading new research about volatility itself being positioned as an alternative asset class. This leads me to two questions: 1. Do you agree that volatility is an asset class? 2. What is the best process to gain exposure to that asset class for my clients? Is simply buying an options with a substantial vega component sufficient, or must I purchase a dedicated volatility asset such as VIX options or an ETF life VXX?   Question from Joe Hill - SPY vs SPX vs e-Mini Options Question. Hello from Georgia. I know that these products are supposed to be similar from an implied volatility perspective, but how similar are they really? After all, they are distinct products, each with its own volume and customer flow. Do they all trade in a similar fashion, or are there times when these products will exhibit discrepancies. Last - Can we get a show on just commodity vol on of these days? Thanks for your time.

Volatility Views 137: Crying Wolf in Volatility ETPs Volatility Review: The week in vol: Global Derivatives Event: It was nice to see a lot of Vol Views listeners and former guests! Sell implied when VIX is low, buy implied when VIX is high. VIX Cash: High - 15.74, Low - 13.13 VIX Options: Total 4.34M (2.89M Calls, 1.46M Puts) VXST: Another weird volume week - 300 to 3,000 contracts on various days. Total 11k (8305 Calls, 2801 Puts) A Review of Jared's Vol ETP Report - Crying Wolf: What the VIX alarmists are missing. Crude Vol: Nat Gas and Oil Volatility Voicemail: Listener questions and comments Question from IndyJoe - I saw Marks tweet about buying high VIX/selling low VIX this week. Can he clarify what he meant by that? Seems counterintuitive. Question from Pat Cummins - I think the pounding the VIX has taken lately is overdone. I am bullish volatility in the long term. Question: What is the best way for me to express that view? You have already dissuaded me from buying VXX as that is clearly the road to ruin. Would I be better off buying and holding a 1-year future? Or is there a third option I am overlooking Question from Alagory - Which is more overpriced - VIX calls or SPX puts?

Volatility Views 136: Oil Volatility and VXST Volume Volatility Review: The week in vol   VIX Cash: VIX rallies - the market rallies has been a big story of this week. A lot of outlets have been jumping on the train. VIX Options: 2.3/1 call/put VXST: A decent week from a volume perspective. OI now at 10,244 (8,015 Calls/2,229 Puts) Introducing the launch of Treasury VIX futures. Crude Vol: XLE, Brent and WTI Listener Mail: Listener questions and comments   Question from Timinc - Hello volatility views hosts. I appreciate your fine program although much of it exceeds my expertise. My question involves the Black-Scholes formula. I’m a student studying quantitative finance and we’re learning about this formula now. My professor stresses the value of this formula but is it still widely used in industry? Do I need to study Black-Scholes in order to get a derivatives quant or modeling job after I graduate? Question from Alan Baxter - What is the best source for data on trading activity in the volatility swaps market? Crystal Ball: Reckless, wild prognostication ensues. Jared flies solo in looking at the year ahead.   

Volatility Views 135: Under-the-Radar Swiss Gold Volatility Review: Vol premium over the past week. Implied volatility vs. realized volatility. Vol Commodities: Oil, currencies, etc. Russell 2000 - RVX   VXTYN - introducing the new 10-year volatility product.     Crystal Ball: What are we looking forward to in the coming weeks?

Volatility Views 134: Earnings Surprises and Greenspan Gold Fades Volatility Review: Big surprises from an earnings vol/straddle perspective this quarter. AMZN - Sold off about $30. LNKD - Closed at $202.50. TSLA next week. CBOE this morning. VIX Cash: 17.87 - 14.04 VIX Options: Total 6.53m (4.46m Calls, 2.08m Puts) VXST: Total 4927 (4918 Calls, 9 Puts)   Volatility Voicemail: Listener questions and comments   Question from Phillipono - Are there any good tools out there for comparing realized to implied volatility and determining the best times to sell premium?                                                               

Volatility Views 133: Skew Inversions and Dynamic Hedges Volatility Review: The week in vol VIX Cash: Most major indices up on the week - volatility returns to Rocktober. High - 23.08, Low - 15.56. VIX Options: A whopping 6.14M contracts total. OTC Volatility: Volker rule and its impact on liquidity. VXST: When is it going to catch fire? Oil/Energy: Strong investment skew, heavy puts activity. Metals: An outlook on gold/silver volatility. Volatility Voicemail: Return of the Don Comment from Don S regarding this listener question - "Let me leave you with this question: Long term which do you think will outperform - dynamically hedged SPY ATM straddle or dynamically hedged VIX straddle? They should be roughly equivalent but clearly they are not." Not sure anyone addressed this in a satisfactory manner.  When you dynamically hedge an ATM straddle (meaning keeping it reasonably delta-neutral throughout), you are making a bet that the implied vol at which you buy or sell the options will turn out to be lower/higher than the actual volatility that the underlying goes on to display during the life of the trade.  So, the first decision to make, which the writer did not address, when he asked about outperformance, is whether he was of a mind to be long or short the straddle.  Naturally, being of sound mind, the only acceptable thing to do is to sell the straddle (!), as, historically, the implieds of the options are virtually always higher than what the realized vol of the underlying turns out to be. So, now that we have decided to sell these straddles and dynamically hedge them, trying to earn the spread between implied and realized vol, the question is, which underlying might provide, on average, the better profit potential.  Typically, SPY implieds average 2-4 percentage points over realized, but, of course, there is great variability in that spread, which even goes negative, ever so briefly, from time to time. Unfortunately, I no longer have access to the comparable numbers for VIX, but, of course, we are now talking about making a bet not on the volatility differential between implieds and realized for an equity index, but rather for implied volatility itself (VIX), which means that the values we are dealing with are much higher (in the 90s, as opposed to in the teens).  Again, I do not have the numbers, but I am guessing that the average spread between what amounts to implied vol of vol and actual vol of vol is somewhat greater than that of those same concepts applied to SPY. Soooo, I am guessing that, for the strategy under discussion, the vehicle of choice would be VIX, and, of course, it goes without saying that the only sane thing to be doing with the straddle would be to sell it.  :-) Perhaps, next show, you would like to throw these ideas out there to see what everyone thinks. Regards,Don   Crystal Ball: More reckless guesses about volatility going forward.

Volatility Views 132: Wearing Tin Foil Hats in Crude Oil Volatility Review: A week in volatility VIX Cash: Quite a week for VIX cash. VIX Options: Again, serious volume in VIX options this week. Top OI Positions: 367,046 VIX Nov-14 20 calls, 354,540 VIX Oct-14 17 calls, 244,354 VIX Jan-15 20 calls. VXST: Another wild market day - another mild volume day for VXST, only 858 contracts traded on Thursday. Energy: Saudi Arabia keeps the oil market guessing.   Volatility Voicemail: Listener Questions and Comments Question from Neal Max - Sounded like you guys were a little skeptical regarding the VolDex product. What do you think of this products chances of actually making it to market? Do you think it has a shot against VIX?   Crystal Ball: Insane, compliance-offending predictions regarding volatility.

Volatility Views 131: Breaking Down VolDex, SkewDex and TailDex Volatility Viewpoint: Today’s guest is Scott Nations, president and chief investment officer NationsShares. NationsShares and ISE have partnered on a new volatility product – Voldex. He discusses: Why is this methodology superior to the current VIX methodology? How would Voldex have performed over this crazy week period compared to VIX? Why do we need this product? Does he expect traders to abandon VIX for this or instead using it as a spreading tool? An overview of two new planned additional products, Skewdex and Taildex.   Volatility Review VIX Cash: Insane realized and implied volatility this week. Range: 14.05-19.38. VIX Futures: VIX cash trading at a premium to all futures except April 2015. VIX Options: Nearly 1 million contracts on Thursday.      Crystal Ball: Jared and Andrew guess vol recklessly.

Volatility Views 130: Talking Volatility Skew Volatility Review: What happened last week in vol? VIX cash: A decent range this week. Non-farms taking the remaining juice out of the market. VIX options: Top OI Positions: 351,982 VIX Nov-14 20 Calls, 339,931 VIX Oct-14 17 Calls, 317,207 VIX Oct-14 20 Calls. Big VIX Trades: Today (Friday) paper traded 457900 VIX Oct 19 calls for $.86 & paper traded 54,997 VIX Nov 23 calls at $.94. Gold vol: GVZ ticking up over the past few weeks - futures options still put heavy.  Oil vol: Continued put love in crude as well.  Volatility Voicemail: Listener questions Question from Crazyhorse - Can some of the roll yield problems suffered by VXX and others be solved by either 1) rebalancing on a less frequent basis or 2) trading a basked of futures as opposed to simply buying the same long term contracts every time? Question from Chris Hanks, Toledo, OH - Hola volatility gang and perhaps special guest. I am a frequent listener and wanted to write in to say thanks for putting out this show every week. My Mondays suck but I get a nice little pickup on my commute when I download the latest episode of Volatility Views. I do miss Don's "sold to you" attitude, but I am sure you will get him back on one of these days. No one gets as fired up about selling vol as Don S. Let me leave you with this question: Long term, which do you think will outperform - dynamically hedged spy atm straddle or dynamically hedged VIX straddle? They should be roughly equivalent but clearly they are not.  Crystal Ball: Jared and Mark make mad prognostications.

Volatility Views 129: Juicing Up BuyWrites Volatility Viewpoint: Today’s guest is Russell Rhoads, who is a senior instructor at CBOE’s Options Institute.  He’s on to discuss a new white paper, A Leveraged Portfolio Management Approach Applying The CBOE S&P 500 2% OTM BuyWrite Index. Summary: Historically, the CBOE S&P 500 2% OTM BuyWrite Index has outperformed the total return that would be expected from passively holding a market portfolio. This outperformance occurred on both an absolute and risk-adjusted basis. Additionally, a leveraged strategy that matches 120% of the expected performance of BXY may enhance this performance with a similar risk profile to the market portfolio. Volatility Review: The week that was VIX Cash - A relatively quiet week until an enormous pop on Thursday. VIX Futures - further developments in VIX Futures term structure. VIX Options - Hot Strikes: 326,209 VIX Oct-14 20 Calls, 296,305 VIX Oct-14 17 Calls & 290,453 VIX Nov-14 20.0 Calls. VXST Options - On a day when VIX spikes 18%, there is still no interest in VXST. RVX actually trading a bit on Thursday. Gold still skewing towards puts - Silver puts starting to catch a bid as well. Crystal Ball: Brazilian elections. Could we see another India-like surge in VIX? Non-farms ahead.