Volatility Views

Volatility Views 87: It All Comes Down to Timing Volatility Review: The VIX shot up at the beginning of the week, but was selling off by the end of the week. There was a broad vol story happening this week, particularly in the commodities with gold vol spiking 500% over two weeks. Volatility Viewpoint: Bob Krause discusses the RealVol Index, available at VolX, which features nine daily indexes. Bob also talks about how a real-time value can be calculated from a daily value. Listener Mail: Tell us what you want to know. Question from Blake M, Troy, NY: If I trade bullish risk reversals, does the volatility premium give me an inherent advantage over collar/bearish risk reversal trades? Question from Mitten, Toronto, ON: When does VolX plan to launch a RealVol contract on commodities? I think a metals contract would be very popular and profitable for the exchange. Question from Mike P: Mark, are you aware of any research, or can you bring on any guest to discuss to the performance of at-the-money straddles during earnings cycles? It can be either from the short or long side. I'm surprised at the lack of available information on this topic, given the importance of the subject matter. This impacts pretty much every options trader at least once every quarter. Any light that you could shine on this through your fantastic radio network and website would be very much appreciated. The Crystal Ball: Apple and other earnings next week, which have an impact on vol premium. The bulls could be coming back in force.

Volatility Views: The Value of Gamma Volatility Review: Gold vol is getting crushed and is off about 4%, with similar action happening in silver. Money is leaving gold and entering bonds and stocks. The Bernanke straddle is in full effect as money flows in from Asia. Lowest realized vol in Gold was charted in early April, with vol spiking ever since. Vol of vol is around 170, and is likely going over 200. Volatility Viewpoint: Today guest is Shreyas Chari, Principal at Satwic Capital Partners. He discusses gamma and its relative value in the marketplace, as well as other aspects of volatility. The Crystal Ball: Weekly options are becoming more efficiently priced.

Volatility Views 85: Responding to Great Listener Questions Volatility Review: It is somewhat surprising to see how little the recent European crisis has impacted the VIX. Perhaps the market over-reacted to the news in Cypress. NASDAQ 21-day realized volatility is below that of the S&P. Listener Mail: Keep those questions coming in. Question from Jim Petchi: I have been listening to Volatility Views for a while, but I still do not understand how the volatility of a specific option relates to the probability of the change in stock price. Does the implied vol of a specific option (like AAPL today at 443, with a April vol of 29%) mean that AAPL has a 29% chance of making a one standard day deviation move, which is 67%, in that time frame? If not, is there some way of relating the implied vol with probability? Question from A Heiner: (in reference to "Risk Reversals Trade BPI" an unusual activity article) What does this mean? I apologize but I do not understand the market and what this says about the future of BPI and its price. Can you break it down for me? The Crystal Ball: The crisis in the Mediterranean will likely get resolved soon, and in a way the market finds favorable. Happy Holidays everyone! We will be back in two weeks.

Volatility Views 84: May You Live in Interesting Times Volatility Review: We are back after a short break last weekend. Most major indexes have reached near-record lows highs. As a consequence, because of the inverse relationship, volatilities are extremely low. Could this be the norm going forward? Is there a line drawn in the sand with options' implied volatilities? Listener Mail: Our team tackles your questions. Question from Phil Fan: Do you ever plan to host a live recording of Volatility Views? If so, when and where? Please put me on the list. Question from Tim Moore: The host frequently says that vol traders don't understand basic math. What does he mean by that? Question from X64: Are there any good tools out there that show up-to-the-minute, even intraday, realized volatility? Question from Aston Meyer, Brooklyn, NY: I enjoyed your recent show with Randy Swan. However, do you really think it is realistic for a client to expect his financial advisor to have a working understanding of volatility, in addition to all the other things they keep track of for their clients (stock selection, tax implications, risk tolerance, etc.)? Thank you for this wonderful program, I have learned quite a bit. Question from StatArb: Do you think they'll pull all the vol swaps onto SEF's along with the CDS's? Crystal Ball: Very rarely have realized and implied volatility been this close to each other, making this an interesting period. VIX settlement next week.

Volatility Views 83: Check Your Levels Volatility Review: We had quite a roller coaster week in terms of implied and realized vol. The importance of vol of vol has been showcased. Listener Mail: We have a huge mail bag today. Question from Big Ned: Is it possible for an options trader to ever truly be flat, aside from closing his positions? Question from Alex Gumble: How do market makers manage their volatility exposure when everyone else in the pit (or bin) has the same position? That seems like a difficult prospect. Question from Mikhail, Ukraine: Why do I need to worry about Vega? I only sell strangles and iron condors. The risk is clearly defined. If price is good, I sell. I price is not good, I don't sell. It’s very simple. Question from Nix01: I liked Mark's article "VIX Activity - Hedge or Sign" from 2/27. Can he elaborate on the show? Comment from Rich@PinProjects: Rule of 16, nice one! Thanks @Options #Volatility. Question from Talos_A: Insider trading has been making many headlines. Do you feel sudden spikes/drops in volatility on a strike are the best indicators or unusual activity/insider trading? Question from Nickel Silver: Where can I buy shares of VolX? Is it publicly traded? The Crystal Ball: Sequestration! Keep an eye on Europe as well. Where can vol go next?

Volatility Views 82: Scalp Gamma, Trade Vega Volatility Review: What is going to shake up the world of volatility? We did see a small pop this week. The weekend effect. The Mail Bag: So many questions! Question from Tim Ross: I’ve heard the hosts refer to "scalping gamma" before on the program. What does that mean and should I be doing that in my own trading account? Question from Nitin Gulati: Mark, Volatility Views is the best educational show in world of options trading and education. No one could have assembled such a great team of hosts. Don often refers to “vol of vol” in his comments, but how can this serve as a useful tool in a retail trader’s arsenal? On second thought, we often use vol cones to understand how realized vol is at lower levels on some individual names, as well as indexes. If implied vol is priced in lower further out, doesn't that mean the market is pricing a muted move in the future? How would a trader differentiate if he only wants vega, since gamma might not be cheap? Question/comment from Southbaytrader1: Looking forward to the weekly fix from your show. Good humor in a world of darkness! When's the next stand-up tour? I enjoyed the vol series discussing Taleb's strategies--interesting to hear competing viewpoints. I would like to hear more on vol futures versus cash, assignment risk, and possible spread strategies for mitigating cash outlays. Your thoughts on margin would be great too. Question from TBill01: What do you guys think of the recent spike in VIX? It seems to be way out of whack with actual movement of S&P. See? I listen! Question from Umberto Toli: Do you feel the current options tax treatments put forth in congress, particularly the covered call tax treatment, will stifle volume and/or drive exchange volume into the OTC realm? If so, what impact do you feel this would have on overall S&P and NASDAQ volatility? Question from Et_Moor16: I am thinking about dispersion trading in AAPL, V, QQQ, GOOG, and AMZN. How much do you think I need in my account to do it? Question from Finn Tompkins: What does the Vol Views crew think of the underperformance of the emerging markets VIX relative to the actual VIX? Is tail risk just overpriced in the U.S. or is it a bargain in the emerging markets? The Crystal Ball: Is the current level of realized volatility sustainable?

Volatility Views 81: Capturing Volatility Premium Volatility Review: It’s about as blah as it can be with very little happening in the world of volatility. It’s not to say we told you so. If there is any edge, it’s in March VIX futures. Volatility Viewpoint: Today's guest is Scott Maidel, Senior Portfolio Manager, at Russell Investments. He discusses: His paper, Capturing Volatility Premium through Call Overwriting (http://www.russell.com/US/insights-research/capturing-the-volatility-premium.aspx) The ways to capture the volatility differential between realized and implied Quantifying the term “overwriting” Findings that overwriting can outperform the S&P 500 in the long-term How the message is being received by the retail audience How the paper quantifies the impact of the roll on weekly options and when the best time is to do so Crystal Ball: Is VIX at 11 possible? Skew may be the best way to go for now. Don and Andrew find common ground.

Volatility Views 80: The Listeners Take Over Volatility Review: NASDAQ realized vol hits 11.33, a continued downtrend not only in NASDAQ, but also S&P vol. The Russell is garnering premium over everything else. Listener Mail: Our listeners are keeping us busy with questions. Question from JoJo - I love the show! Have you thought about bringing on a CTA? Question from Justin Deveroe - Can you walk me through a few potential use-cases for a NASDAQ vol contract? I like the show and I'm intrigued by the idea, I'm just not sure how to trade a product like that. Question from Little Tim - Why do you think GLD is "underperforming" right now from a volatility perspective? SLV seems to be stealing all of the thunder in the volatility realm these days.Question from Theodore Grey - I enjoyed your recent shows featuring financial advisors, but I found the reticence of many advisors to even implement basic hedges very troubling. Why do you think so many advisors and asset managers lack even basic knowledge of volatility or how to hedge a portfolio with options? Question from Allie, Anchorage, AK - I have about $25,000 in my trading account. I've learned a lot about the realized vs. implied discrepancy by listening to this program, and I would like to capture that in my own trading. Unfortunately delta neutral trading is pretty much out of the question with my account balance. What do you recommend for someone like me who would like to practice what you guys preach, but doesn't have access to an institutional level account? I'm sure many of your listeners are in a similar situation. Question from Monster6 - Correlation is a growing concern across asset classes; it's all but impossible to diversify away risk in this marketplace. Would you guys advise your listeners that a volatility/derivative component is the best way to truly hedge/protect a portfolio these days? If so, which would you recommend? The Crystal Ball: Perhaps the Russell will be our salvation for a little action over the weekend. Looking for price increases in all the major indexes in the future.

Volatility Views 79: Derivatives Strategy ConsultingVolatility Review: Premium coming out post non-farm payrolls. How long can volatility stay this low? Will VIX have an 11-handle by next week?Volatility Viewpoint: Today's guest is Mark Shepherd, Founder of DSC, Derivatives Strategy Consultants. He discusses what types of structured products his firm offers, how he advises clients in a low volatility environment, and how he hedges his clients. The Crystal Ball: What will juice volatility in the coming weeks? The metals remain the last bastion of volatility in this market.

Volatility Views 78: Making Money in Spite of Yourself Volatility Review: Apple set fire to their earnings estimates, and then plunged to murky depths. NASDAQ vol. Implied vols, as measured by VIX, are currently at the same level as 21-day realized S&P vol, but are still overpriced with respect to shorter, 10-day realized. Listener Mail: Don, Mark, and Mark dive into the listener mailbag. Email question from Neil Ducat: I like the discussion of commodity volatility on your recent episodes. Are there any plans to include a regular commodity vol update in your Vol Review segment? Email question from Tim S.: The commodity discussion on your recent episode was illuminating. I would like to ask your opinion on this: Given the success of commodity options and futures, why haven't commodity volatility products (like gold VIX, etc.) really taken off and captured the imagination of the investing public? Twitter question from Mr. Auto: With Apple and other recent names blowing through their straddles post-earnings, would Don concede that there are indeed times when it is appropriate to buy volatility? Comment from Alfonso Strolli, Florence, Italy: Ciao Vol Views crew! I find your program very informative. Mark Longo is indeed the voice of options, and certainly the best in the world at what he does. Don provides the perspective of a veteran of many volatility battles, and Mark Sebastian is nothing but entertaining. Thank you for this great and unique program. Keep up the good work! Email question from Tim42: Has Don ever bought an underlying, or does he sell those too? Email question from Ed: I am very interested in SPX and SPX volatility (aka VIX). I understand Mark Longo is a former SPX market maker, what are his impressions of the current trading range of SPX vol vs. his time in the pit? Does it perform differently now than it did then? Also, if possible, could he share his favorite trading story from his SPX days? Thank you very much. The Crystal Ball: Gold and silver catching eyes of those looking for volatility. Email question from Donald Simmons: With volatility trending lower and no relief in sight, what do the hosts think of interesting strategies for a time of stagnant volatility?