Volatility Views

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 volati

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.

Volatility Views 67: VolContract Futures Overlays: The Holy Grail? Volatility Review: What's going on with the VIX rallying on a slow day like today? NASDAQ rundown. This is the first time we've moved down more than 1% since June 26th. Volatility Viewpoint: Today's guest is Nick Li, a Quantitative Analyst for VolX. He tells us about the paper "VolContract Futures Overlay on an S&P 500 Portfolio," which compares some different implementations of VolContracts in conjunction with an equity portfolio.  The Crystal Ball: Realized volatility should tick up a bit, but it depends on earnings.

Volatility Views 66: A Week without VolatilityVolatility Review: The week in vol that never happened. Yes, it was a very quiet week. NASDAQ and S&P both dropped off severely since the last week.Listener Mail: Our listeners drive the bus for a while Did Don start off as a vol seller or did he have a few losing long vol trades first that turned him to the dark side? (Via Tweet from @THIMSTER) Do you guys subscribe to the notion that the market is fully hedged with VIX, which is why VIX is underperforming? (Via Tweet from @XZTON) Does VolX have any plans to launch any realized volatility products on commodities such as ags, metals, etc.? Thanks and keep up the great work. (Via Email from Sid K., Des Moines, IA) What do you guys think of Apple call verticals here? Does Apple skew make buying them more attractive going into earnings? (Via Tweet from @Duncan6) Why is NASDAQ historically a more volatile index than the S&P500? Is it simply because it contains more tech stocks, so that generates more volatili

Volatility Views 65: Contango Tango   Volatility Review: The VIX is back at 14. We're definitely in a lower volatility environment. The May futures are currently trading around 24, which is almost three times current S&P realized volatility. Not much movement in NASDAQ.  Volatility Viewpoint:  Today's guest is Mike Cavanaugh, president of Know Your Options, Inc. Mike talks about hedging stock portfolios with options and volatility products, the trouble with opening rotations, and more.  Crystal Ball: Don't expect much to happen in the next week or so. Non-farms and the VP debate upcoming.

Volatility Views 64:  Missing the Fat, Juicy Puts of YoreVolatility Review:  Looking back at a four-day time horizon.  At this point, most of the indices are unchanged on the day. Don starts us off reporting that we saw actual movement in realized vol for both NASDAQ and S&P. NASDAQ components making the index rather interesting. (Yes, that means AAPL.) S&P implied vol being driven by the European cocktail of news of the day. Does skew have it all wrong? Andrew sees a floor in VIX around 13.Volatility Mailbag:  The team lets the listeners steer the conversation. Email from Michael: "Does volatility play a role in dividend exercise/assignment? Is Vega a major factor in most dividend scenarios?" Tweet from Ian K: "Can you talk a little about commodity volatility skew? Why is it so different than equity skew?" Facebook question from Christian Garcia: "Is it worth it to be stuck on the screen all day with regard to gamma scalping? Does Mark Sebastian's formula (pay-to-the-decay) work on futures options?"

Volatility Views 63: The Low End of the Volatility Spectrum Volatility Review: Vol didn't get a boost going into the weekend, but it didn't sell off either. Very dull week in NASDAQ. Listener Questions: The listeners direct the conversation. Comment from Lee on Mark Sebastian's "Arrogant VIX Trade" story: "Possibly one of the most honest and transparent posts I've seen about a losing trade and the reasoning behind it. Well done and thanks for the honesty. We have all been there, fighting a losing battle because our head tells us we are right when everything else is telling you otherwise. It really highlights the need to follow a plan, stick to you risk reward no matter what happens and act like a robot with no emotion when trading. Regards, Lee" Facebook Question from Tom Sevens: “You guys are always talking about the implied volatility premium vs. realized. But it seems like implied vol is always priced at a premium to realized, so is there ever a reason why anyone would want to do the opposite trade

Volatility Views 62: Bad Money ManagersVolatility Review: The team takes a moment to discuss the problem with buying a put versus selling the stock and going to cash. Big events to move vol this week, including Apple iPhone 5 launch.Listener Mail: Letting the listeners take control of the conversation. I loved last week's show. I'm very glad to have Vol Views back in the saddle! My financial advisor recently recommended that I allocate a portion of my portfolio over to VXX because "VIX is low." I didn't know what he was talking about. When I Googled VXX I came across this program and have learned quite a bit. Thank you for informing me, but I'm still uncertain as to his VXX recommendation, especially after hearing your comments about TVIX. Should I allocate some of my portfolio to VXX? Why are VIX cash and front month VIX futures the same right now? Don - Is there ever a case when you would buy vol? You guys are always talking about Volatility skew. I recently noticed that, in Apple, the calls were bid subst

Volatility Views 61: A Short Straddle for CowardsVolatility Review: Vol review from the last few weeks. Short story: vol has marched downward to near-record lows.   Volatility Viewpoint: This week, Mark and Don are joined by Dan Passarelli, Market Taker Mentoring.  Dan discusses Market Taker and how he approaches volatility with a new client.  He also talks about mentoring students who want to dive into sophisticated vol products, like VIX options, for example. Does he counsel the novice trader to avoid these products? How does he train students to be aware of volatility levels for each trade that they make? They also discuss gamma scalping and delta neutral trading, and where Dan falls in the volatility hedge vs. direct hedge debate.Mailbag: Answering listener mail..    When is Volatility Views coming back live?.    Someone bought 20,000 Feb 75 calls in the VIX yesterday. That's near the ultimate all-time high for the VIX. Why do so many people dramatically overestimate VIX, particularly to the upside? Peopl

Volatility Views 60:  Jackass Investing: Don't Do It. Profit From It. Volatility Review: NASDAQ overview over the last month, since our last show. How low can the vol go? A buyers opportunity.  Volatility Viewpoint: Today's guest is Mike Dever, Founder and CEO of Brandywine Asset Management, and author of Jackass Investing: Don't Do It. Profit From It. He starts with his unique approach to volatility. Is it possible, given such broad correlation among asset classes, to be able to really diversify? The book says you can increase returns, while reducing risk at the same time. Is this preaching the wisdom of using derivatives? The "loser's concept." What does he say to readers who are concerned about the current state of regulation and oversight in options and derivatives?   Crystal  Ball: Looking ahead for the next month for NASDAQ vol and VIX.

Best of Volatility Views: Busting Skew Myths Busting Skew Myths! Does the Lottery Effect actually exist? Do flaws in the Black-Scholes model create skew? Were options traders prior to 1987 completely insane? Also, an exploration of the fundamental and psychological causes of Equity/Investment skew.

Volatility Views 59:  A Deep Dive into Variance SwapsVolatility Review: VIX has certainly declined since the last show, with a pop happening only recently. NASDAQ vol rundown since last show. Apple's impact on the NASDAQ wasn't as big as expected.  Volatility Viewpoint: Don goes over some of the math of variance swaps, including how they differ from vol swaps, variance and vega notional, convexity, and vol of vol.Listener Mail: Addressing Listener QuestionsVol Views Gang - Which will we hit first a VIX of 40 or 14? (Via Twitter from TEXASTEA)Why don't more brokerage firms allow you to quote options by vol levels instead of price/premium levels? You'd think this would be a very desirable feature, particularly to the type of educated clientele that listens to a show like Volatility Views. That's certainly a desirable clientele for a broker. I know I would certainly like that feature. Can you guys weigh in on this and hopefully help me spread the word for this feature among online brokerage firms. (On a side not

Best of Volatility Views:  Larry the LegendIn this episode, Mark, Don, and Mark Sebastian are joined by Larry McMillan.Volatility Viewpoints: Larry McMillan, recent winner of The OIC's Sullivan Award, discusses how volatility derivatives have changed the landscape of vol trading. Larry waxes nostalgic on the days when there weren't puts on every stock. The virtues of upside VIX calls versus SPX puts to hedge a portfolio.  Discussing the fine art of gamma scalping.

Best of Volatility Views: The Great Skew Debate 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.

Another selection from The Best of Volatility Views. In this episode, dated June 20, 2011, Mark and Don chat with Bill Luby, creator of the popular website VIX and More. They discuss the roller coaster volatility of late, whether the VIX has underperformed given current market conditions, whether VIX futures are essentially irrelevant, whether VIX should be marketed as a hedging tool, the inherent differences between implied and realized volatility, Euro vol updates, and much more...Read more: http://www.theoptionsinsider.com/radio/#ixzz1zVHYNY61 The Options Insider: Your Inside Source For Options Information 

Best of Volatility Views: Volatility Discussion with Nobel Laureate Robert Engle Mark and Don have the honor of speaking with Professor Engle on various aspects of volatility, including: Professor Engle's move from physics to economics ARCH and GARCH models, and how the ARCH model was born The Volatility Institute Vlab SoFiE Professor Engle's work with the SEC's Flash Crash Advisory Committee The Professor's viewpoint on Dodd-Frank, particularly as it applies to derivatives & counterparty risk.

Volatility Views 58: Cracking the Bond Code Volatility Review: NASDAQ realized volatility makes a slight upward move, and until we get any evidence to the contrary, this action will likely continue. Volatility Viewpoint: Today's guest is Dr. Madhu Kalimipalli, Associate Professor of Finance and Director of the Financial Services Research Center at the School of Business at Wilfrid Laurier University in Waterloo, Ontario, Canada. Dr. Kalimipalli discusses:-His research, in which he looks at correlations between overall equity market vol and the treasury markets.-What kind of skews he sees in the bond markets insofar as implied volatility is concerned.-Which variable is preferable to use, VIX or the stock turnover, or both?-How the volatility of a particular underlying correlates to corporate bonds on the underlying.-If he finds a more exact bond spread relationship in the near-term as opposed to the long-term.-How actual equity or stock market volatility matters in terms of pricing when you throw in

Volatility Views 57:  Turning the Tables on Mark Sebastian Volatility Review: VIX is back this week, after it ended unchanged at 0.0 before last week's Option Block episodes. Time will tell as we see what happens in Europe. NASDAQ one- and three-month realized volatility has had almost no movement at all, but the trend is surely upward.  Volatility Viewpoint: Long-time panelist Mark Sebastian gets the chance to sit in the guest's seat and discusses what Option Pit is and the world of options education.  Mail Bag: Answering listener questions.CBOE is in the process of changing the way they list weekly options. How do you think the change will impact weekly options volatility, as well as the way they perform? Thanks again and I love the show. You guys make my commute to work a little more bearable. (Via Facebook from Chris Monty) In a time spread, which risk/opportunity should I really focus on: gamma or vega? It seems like trading time spreads is essentially finding a proper balance between these two. (Via em

Volatility Views 56: More Listener Mail Fun Volatility Review: Broad selloffs across the markets, due to the poor jobless claims numbers. One-month realized volatility on the NASDAQ was up about half a percentage point to 17.40, and the three-month edged higher to 16.02. Reacting, rather than predicting, was the order of the day. Listener Mail: We're Going Listener Mail Crazy Again This Week How do you guys feel the addition of Facebook will impact NASDAQ volatility in the future? (Via Twitter from DAMIAN14)What's your opinion of Facebook's option vol and options trading so far? (Via email from Tim L. in Portland, OR) Any update on the NASDAQ VolContracts? (Via Twitter from EuroDJ) Is delta neutral hedging the only way to trade realized volatility in the options market right now (outside of VolContracts on the Euro, of course)? I like what you guys talk about every week and I'm looking for ways to capture that good ol' "realized vol." (Via Facebook from Steve K., Victoria, BC) I just wanted to write in t