Volatility Views

Volatility Views 42: Pricing VolContract Futures: Part History, Part Mystery Volatility Review: Euro vol review. How has the Greek settlement affected Euro Vol? Nasdaq vol review. S&P’s overly dramatic brother, Nasdaq is an interesting beast these days. Many of the swings in the S&P are greatly exaggerated in the Nasdaq, due in part to the tech-heavy nature of the index. How has that played out from a vol perspective? Are we seeing the same degree of selloff in the Nasdaq vol? An explosion of volume recently in the T-VIX. There is something very interesting going on. Volatility Viewpoint: Don discusses a little about expected pricing of VolContracts — information he touched upon before, but needed some clarification. Listener Mail: Question 1: I know Mark has said several times in the past that the difference between retail options traders vs. pro options traders is that retail trades direction while professionals trade volatility. I wonder if you guys can elaborate on this a little more, as I'm a little confused by the distinction. Do pros implement different strategies? Different products? How do they trade volatility and how does that differ from the way retail trades options? Question 2: Nasdaq or SPX — Which has had the greatest "vol of vol" over the past few months? Crystal Ball: The continued discrepancy between the VIX futures and VIX cash — how will that play out? Will the Nasdaq continue to hover in this range, or will we see a turn south sometime in the near future?

Volatility Views 41: Breaking Open the Volatility Mailbag Volatility Review: SPX/VIX review — some level disparities between the VIX cash and the VIX futures. Euro vol is in single-digit territory. Nasdaq VolContract preview. Listener Mail: Comment on the Great Volatility Skew Debate, Don's comments on volatility, and questions about Nasdaq VolContracts. Crystal Ball: How will the disparity between VIX cash and VIX futures unwind? Where will Euro vol go next?

Volatility Views 40: Manipulating The VIX Volatility Review: Euro vol review. March Euro VolContract has an interesting phenomenon brewing — realized vol calculation is 7.93, and the inferred volatility is 10.84. How or where will they meet? Major correlation break in VIX/S&P 500. Volatility Viewpoint: Not afraid of controversy, the panel discusses the notion of VIX settlement price manipulation with Henry Schwartz, founder and CEO of Trade Alert. Crystal Ball: Short VIX going into the weekend, but then watch out for the unknown unknown. Don makes a shaky prediction that the Euro vol will dip lower.

Volatility Views 39: Redefining Normal Volatility Review: How low can vol continue to go? Dancing around 17 in VIX cash. We have finally reached perfect equilibrium. The last 22 trading days of realized volatiity was 6.73 for the S&P, the lowest Don has remembered since 1994. Lofty numbers have skewed people's ideas of "normal," and it's time to reassess the definition of it. Expiration day for the February Euro VolContract. Volatility Viewpoint: Mark, Mark, and Don discuss volatility correlation, overlays for equity portfolios, and several other uses for volatility products with Simon Acomb, from Acomb Financial Research, Ltd. Crystal Ball: Dipping into the murky depths of volatility. Mark S. sees a flattening of the VIX yield curve, and thinks it makes sense to isolate gamma and short VIX using S&P versus VIX futures. Don provides insightful Euro vol picks. Information on the volatility workshop that Simon discussed can be found here.

Volatility Views 38: The Great Skew Debate Volatility Review: What is going on with the VIX? How low can it go? Sebas sees VIX going to 16. Don gives a Euro VolContract update, noting the equity-like behavior (underlying increased, while vol dropped). Looking forward to the Nasdaq 100 VolContracts. Volatility Viewpoint: Mark, Mark, and Don discuss volatility and skew with John Bilson, Professor of Finance at the Illinois Institute of Technology's Stuart School of Finance. Professor Bilson also proposes two new types of contracts for the marketplace. Crytsal Ball: Right now, there are good opportunities to buy individual equity options because volatility is so low. Mark Sebastian uses AAPL as an example. The impact of the leverage effect. Don thinks that the vol levels on the Euro VolContracts look just about right.

Volatility Views 37: Volatility: How Low Can It Go? Volatility Review: Might we see VIX below 20 for some time to come? Euro vol up slightly since last week -- Bob Krause called it correctly. Two weeks to go in the Feb VolContract.Volatility Viewpoint: Don gets a chance to give his views on last week’s topics and talking points from Nikunj Kapadia, Associate Professor at the UMass Eisenberg School of Management. Mailbag: VolContracts on the NASDAQ!!!“Woohoo!! This is what I've been waiting for, a realized VolContract on an underlying that I actually trade. This is going to open up a whole new world of trading possibilities for me. I can't wait to short VXN and buy the realized Nasdaq product. I won't need to wait for Don to earn me an island in the Bahamas, I'll pick one up myself when I collect all that juicy risk premium. In all seriousness, I couldn't be more excited by this announcement. This will be an enormous development for VolX as well as for all the realized vol aficionados out there. As the book says ‘We are legend.’”Options on NASDAQ Vol Contracts“On the last show Bob Krause announced that VolX is planning to launch Vol contracts on the Nasdaq. He also said that you plan to launch the full suite of products on the Nasdaq VolContracts, including options. Now correct me if I'm wrong, but wouldn't the option be priced on an implied volatility basis? So essentially, you'd have an implied volatility instrument trading off a realized trading instrument. That is an intriguing scenario, but the inherent contradiction makes my brain hurt whenever I think about it for too long.” Crystal Ball: Vol could stay below 20 for a while, VIX futures are even on sale. Is volatility at 12 realistic for the Euro going forward?

Volatility Views 36: The VIX vs. Black Swan: Analyzing Tail Risk in the VIX Volatility Review: Another interesting week in general volatility. Although predicted to settle around the new mean of 23-25, VIX is down to 19. Where will it go next? CBOE has finally put out an adjustment to their settlement process. Euro VolContract review. Volatility Viewpoint: This week's guest, Nikunj Kapadia from UMass, sits down with Mark and Bob to discuss Black Swans, volatility pricing, tail risk, and buy-writes. Crystal Ball: VIX may be headed towards 19 from heavy pressure on VIX Jan and Feb futures. Could we really see an explosion to the upside? Big news at VolX!

Volatility Views 35: Aggressively Selling Volatility in the New Year Volatility Review: After a holiday hiatus, Mark, Don, and Mark Sebastian discuss and review current and upcoming vol in 2012. The $64,000 question: Why is vol getting crushed? What's happening in the Euro zone? Volatility Viewpoint: A grab bag of volatility topics in this viewpoint section, including: VIX futures--how they trade, the nature of their term structure, contango, etc., and actual realized vol in the market for the past year. Mailbag: Best method of volatility measurement? "I've just found this show on iTunes and I find it very enlightening. Thank you for producing a quality show on this topic. I'm relatively new to options and I'm looking to do some basic modeling to get a better handle on options pricing and performance, but I'm hung up on which volatility measurement to use in my model. Close to close volatility certainly seems easiest but I'm not sure if it would be accurate enough for my needs. Should I try for something intra-day or should I stick with the easy path? Thanks, John." Crystal Ball: Vol, S&P, VIX, EuroVol Contracts, and Jan futures--where are they moving this year? A few new contracts may be in the pipeline over at VolX.

Volatility Views 34: A Break from the Insanity Volatility Review: This was an intriguing week for volatility action. Strange week in the world of VIX, with it finally returning to "normal." The novel concept of being fully insured. The seasonality of VIX--general uptrend in market plus professionals taking money off the table equals a perfect storm in VIX. Euro VolContract updates--December one-month went out at 11.12, three-month at 12.84. Volatility Viewpoint: Mark and Don discuss volatility with Stephen Figlewski, Professor of Finance at NYU's Stern School of Business, founding editor of the Journal of Derivatives, and Director at the Nasdaq OMX Derivatives Research Project. Crystal Ball: VIX at a much more tolerable level, but Mark thinks it will vascillate in this "new mean" for quite a while. January Euro VolContract is fairly new, but volatility is forecasted to be lower going out. Click here to access the Salomon Center that Prof. Figlewski spoke about in Volatility Viewpoint. Prof. Figlewski's personal webpage is available here.

Volatility Views 33: The Art of Managing Volatility Volatility Review: VIX has been up and down around the 30-handle, but now it is time for it to begin to settle at a more normal level. Friday was quarterly expiration day in the Euro VoContract futures, with the front one-month and the December three-month going out. Volatility Viewpoint: Today's guest, Chris Cole, Managing Director at Artimus Capital Management, sits down to discuss VIX options and futures, volatility doldrums, and the trading approach at Artimus. Crystal Ball: VIX is a coin flip with regard to both the long-term and short-term mean. The gang looks at the January one-month and March quarterly Euro VolContracts and their implied volatilities versus potential realized vol.