Volatility Views

Volatility Views 77: Volatility from a Wealth Advisor Perspective Volatility Review: Bob Krause pinch hits for Don in this episode. Volatility has recently jumped in corn and interest rates, but is still at very low levels when compared to a very long-term historical viewpoint. NASDAQ volatility has been moving roughly the same as S&P. Volatility Viewpoint: Today's guest is: Randy Swan, Co-founder of Swan Wealth Advisors. He discusses: Overlays How, as a wealth advisor, he tailors strategies How he incorporates volatility and volatility levels into his strategies How he hedges the S&P 500 How he feels about some advisors still clinging to outmoded traditions And more Crystal Ball:NASDAQ and S&P outlook. It seems like the one thing we were looking for to juice the market and give us some vol in the near future has been taken away from us -- hence the massive selloff.

Volatility Views 76: Commodity Futures and Volatility Volatility Views: Not much happening from a volatility perspective. NASDAQ vol review. VIX review. Volatility Viewpoint: Today's guest is Rob Heineman, a commodities broker at the Chicago Board of Trade. He discusses strategies to use going into crop reports, skew, volatility arbitrage, the impact of one commodity on another, the impact of weather, and more. Crystal Ball: NASDAQ and S&P outlook. It looks like it might be more of the same with little vol movement. We're stuck in the mid-winter summer doldrums.

Volatility Views 75: New Year, New Questions Volatility Review: Happy 2013 to all our Volatility Views listeners! The market rallied across the board and then sold off after a deal was finally struck in Washington. S&P vol review. Mail Bag: Keep those questions coming. · Tweet from Southbay Trader: I especially like Volatility Views! · Tweet from Billmoo: OIR - Top Financial Podcast of 2012! · Email from Allen Jacobs - Danbury, CT: Can you guys talk about dispersion trading? I've heard that term quite a bit recently. I think it has to do with volatility trading, but I'm not sure how or why, but I think I've turned to the right people for help. Thanks for your show Mark, it's a big help to people like me, who aspire to one day be volatility pros like you guys. · Tweet from Leroy: Why weren't people aggressively shorting vol pre-cliff deal like the debt deal? · Email from Anonymous: I run the vol book at a local shop. I found your show about Mr. Black Swan very illuminating. I've read all of Mr. Taleb's books and even met him several times. Like you, I assumed his trading style to be heavily long premium, and was surprised to hear the opposite. I would expect former market makers like "the Marks" and a former upstairs trader like Don to be aggressively short ATM premium, but not Mr. Taleb. He appears to be preparing himself for his black swan events by back spreading and being net long units, so it isn't a complete cop-out - he's not just writing ATM straddle and heading for the hills. Like all of you and your recent guest (Jared Woodward), I too am left with a somewhat bitter taste in my mouth after learning this information, it doesn't fit with the overall message and marketing of his work. · Email from Theodore Grant - Pittsburgh, PA: Mark, Volatility Views is my favorite show on your network! I wish there were more podcasts out there talking about volatility trading - you guys truly stand alone. My question has to do with tail risk, one of your favorite subjects. You guys always talk about tail risk and how it's become dramatically overpriced in indexes like the S&P 500 and even large cap stocks like Google. What about in commodity products like GLD, corn, oil, etc.? In those products the tail risk is found on the upside. Do you see the same overpricing of premium in the upside calls in those products as we currently see in downside SPY and Google puts? Thank you. The Crystal Ball: Earnings season kicks off next week. Are we heading towards the winter doldrums?

Volatility Views 74: Digging Deep into the Listener Mailbag Volatility Review: Most indices down 1% fueled by rumors out of Washington about a collapse in the deal over the impending "fiscal cliff." Listener Mail: So many questions for us to answer. Tweet from Doc Hudson: What is your pick for volatility trade/product/development of the year? Tweet from Man of Steel: What do people mean by “selling or buying skew”? What are those trades? Tweet from VIXen - Why are iron condors so hot right now? Seems like everyone is selling them these days no matter the vol landscape. Email from Sam Felis: Why are the front-month VIX futures trading above the cash right now? I need the Vol Views pros to explain this to me. Tweet from Sam Dash: Don -- sell or don't sell vol in 2013? Give me your thoughts? The Crystal Ball: What can we expect to see in 2013?

Volatility Views 73: Once More unto the Black Swan Breach Volatility Review: NASDAQ vol hits 13.08. Apple, despite its tremendous movement, is having little effect on NASDAQ volatility. S&P realized vol versus implied vol. Listener Mail: Back to Black Swans. Comment from Asymmetric Risk: According to Don, Nassim will lose money over the long run because the out of the money options he buys have a higher implied volatility than the close to the money options he sells. Since he is paying a spread, Don thinks this is a bad strategy. Far be it for me to disagree with Don, but speaking for Nassim (and I feel confident speaking for Nassim because I've had dozens of conversations with him on this exact topic) Nassim would agree he is paying a spread but the spread between ATM and OTM options is systemically underpriced. Nassim's strategy is based on his belief that asset prices are not normally distributed -- the bell is flatter and the tails are fatter. So options markets overprice one standard deviation risk ("I always sell ATM straddles") and underprice two standard deviation risk (Black Swans). Your critique of him is misplaced because you're focusing on 5- and 10-sigma events which are not required for his strategy to work. He ran a large option book at a major investment bank and was profitable on a monthly basis. Tweet from Don M.: Shouldn't Nassim be a net buyer of tail puts if he feels tail risk is underpriced? If he sells ATM, does he buy OTM on a ratio? Make no sense to me. Email from Tim Vicks, Fredericksburg, VA: Let me see if I have this straight: Black Swans are extreme outlier events that are unpredictable, yet so catastrophic as to alter the course of human events. But the way to prepare for these events is to sell premium? What am I missing? The Crystal Ball: Sebastian foresees a massive spike in realized vol with little to no spike in implied vol. Is it time to own gamma and be short vega? Still waiting for some news out of Washington.

Volatility Views 72: Closing the Book on Black Swans Volatility Review: It was a very slow week in volatility, with the VIX sticking close to 16. Near-term VIX futures were trading at 0.50 below the cash contract at one point this week. Listener Mail: Mark, Andrew, and Don answer listener questions. Comment from Teddy: This is a great article. I really hope you guys discuss this on the next episode of Volatility Views. I'm curious about this new low vol VIX. What is the point of it? Comment from Oscar (about Woodard's article): This is a good article, and given the last episode of Vol Views, this is very timely. When are you going to have Condors Options on the show? It seems like they would fit nicely with Mark, Don and Mark. Comment from Asymmetric Risk: I've never read any of Nassim's books, much less his research. However I've probably traded more options with him than any of his counterparties, going back to the 80's when we were the two most active currency options traders globally. I would describe him as a buyer of back spreads, and very well positioned for gaps or jumps. Many of which were not black swans per se, for example, the sudden 10% currency move we had when the Swiss National Bank put a floor on the Euro recently. Your critique of his strategy was unduly harsh, because while he is set up for black swans, he isn't dependent on them to be profitable, as you guys characterize him. Email from Mark S: Should I even pay attention to the vega numbers when trading weekly options? It seems like vol is mostly irrelevant in such a short-dated option and that any measurement of that vol would be highly prone to error. Weeklies seem to be gamma/theta beasts, so that's where I expend the bulk of my effort and analysis. The Crystal Ball: We're still waiting for a settlement in Washington on "the fiscal cliff." The Crystal Ball: We're still waiting for a settlement in Washington on "the fiscal cliff."

Volatility Views 71: Condor Options Takes on Black Swans Volatility Review: Near-term vol of vol has been extremely low of late. NASDAQ and S&P vol review: over the past two weeks vol has been almost unchanged. How has our frame of reference for vol changed? Volatility Viewpoint: Today's guest is Jared Woodard, the founder of Condor Options. He discusses his recent article about volatility and black swan events. What was the response from Taleb? A major bombshell is dropped. Plus, Jared also gives his take on volatility risk premium. The Crystal Ball: The fear of the weekend. What could happen with "the fiscal cliff"? Here is the link to the article on Condor Options' website.

Volatility Views 70: Stop Worrying about Black Swans Volatility Review: Selloffs continue, though the VIX has not changed much. VIX review. NASDAQ vol review. Almost no change in realized vol. Volatility Viewpoint: Some interesting topics emerged from this week's global derivatives conference: Is vol cheap? When VIX cash hit 13.5 this year, the cost of the six-month hedge was the same as the day after Lehman defaulted. VIX ETPs are problematic, part 1: They are not very adaptable to new volatility regimes. VIX ETPs are problematic, part 2: In the last 15 minutes of the trading day, VIX futures are far more volatile than VIX or SPX themselves, indicating the impact of these structured products on seeking alpha and roll yield. Is too much tail risk priced into the market? S&P puts and VIX calls are priced as though black swan events are imminent and occur with alarming regularity, as opposed to being the rare events that they truly are. Implied vs. realized volatility premium: Implied volatility premium, as opposed to its realized counterpart, is higher in short-duration VIX options. In general, this favors strategies that sell shorter-dated options and buy longer-dated options. Crystal Ball: Looking ahead at NASDAQ volatility and the VIX.

Volatility Views 69: Unlocking the Secrets of the Vol SurfaceVolatility Review: The post-election selloff seems to be over for now. A bit of politics, plus a two-week rundown of S&P and NASDAQ vol.Volatility Viewpoint: Today's guest is Alberto Cherubini, the founder of EQ Finance, who discusses volatility surface models, exotic trades, as well as OTC vol and how it is impacting that of listed products.Crystal Ball: We are hoping for a major announcement, any day now, concerning VolX. Stay tuned. Assets with inelastic demand and sensitivity to the US dollar will rally.

Volatility Views 68: The Dark Art of Futures OptionsVolatility Review: NASDAQ vol and how it has been affected by earnings. Implied risk premium. S&P vol.Volatility Viewpoint: Today's guest is Jeff Lewandowski from Foremost Trading. He discusses his transition from CBOE to futures, as well as the odd shape of commodity volatility skew, smile skew, and premium levels.The Crystal Ball: NASDAQ vol going into the big numbers tonight ahead of AAPL earnings. How will earnings affect realized vol? All the big tech names are outperforming. Looking ahead to S&P vol.