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What’s Working Now

Sunday, April 20, 2014

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The easy approaches to the market that worked so well in 2012 and 2013 have performed poorly so far this year. We're more than a quarter through 2014, and the S&P 500 is up just 0.78% for the...

Good things at other places

Monday, April 14, 2014

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1) Every quarter, Matthew Boesler at Business Insider polls analysts, economists, and portfolio managers for their picks of the most important charts in the world. Here’s the most recent update, and here is my contribution. The whole series is a great resource. 2) If you listen to podcasts and are a reader here, chances are you’re probably already a fan of Volatility Views, one of the many excellent offerings from The Options Insider network. If you aren’t…

U.S. Market Risk Dashboard Update – No Warnings Signs, Yet

Tuesday, April 8, 2014

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Given the fierce market selloff in recent sessions, I thought it would be helpful to check on our favored set of risk indicators for the U.S. market. As of the Monday close, VIX is above its two year median level, indicating a stronger bid for short-dated SPX premium. Longer term implied volatility is still well-anchored with SPY one year at the money options priced near the first quartile threshold. The other indicators are not at elevated levels, either: while…

Highlights from the CBOE Risk Management Conference

Monday, March 24, 2014

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The annual CBOE Risk Management Conference was held last week in Bonita Springs, FL, and it was a great opportunity to meet some old friends, make new acquaintances, and hear from some industry leaders. I thought I’d share some of my favorite moments from the conference sessions. The most important news from the conference was the announcement by CEO Edward Tilly on Tuesday that, beginning in June, the exchange will offer nearly 24-hour trading in VIX futures five days a…

CBOE Hosts the 30th Annual Risk Management Conference

Thursday, March 6, 2014

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The Chicago Board Options Exchange is holding its 30th annual Risk Management Conference this month in Bonita Springs, Florida, from March 17-19. This is one of the top events of the year for the options industry, and the conference has developed a reputation since its inception for high-quality speakers and panels. The CBOE provides this description of the event: “RMC is an educational forum dedicated to exploring the latest products, trading strategies and tactics used to manage risk exposure…

Options markets aren’t convinced about the “seismic” scale of Russian intervention

Monday, March 3, 2014

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On Sunday, Eurasia Group President Ian Bremmer wrote about the scale of recent events in Ukraine: “As Russia conducts direct military intervention in Ukraine, the US and Europe condemn it, and the Ukrainian army goes on high alert, we’re witnessing the most seismic geopolitical events since 9/11.” But the options market is not yet convinced of that assessment. Russian stocks fell 10% in early trading on Monday, but the reaction in the RSX ETF has been more bullish than…

Reading In Lieu of Bearishness

Tuesday, February 25, 2014

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You know that one slogan about how bearish investors always sound “smarter,” even if they’re wrong most of the time? I’m not sure that being able to conjure up obscure risk scenarios is the same thing as sounding smart. But nevertheless, here is a linkfest in the spirit of that slogan: sometimes, taking some time out to read is a good way to avoid buying stuff at too high a price. - “VIX options make exotics leap” – This…

Doing What It Says on the Tin: The Value of Volatility ETPs

Tuesday, February 18, 2014

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The iPath S&P 500 VIX Short-Term Futures ETN (VXX) launched in 2009, but after five years and many billions in transactions, it’s still a widely misunderstood product in some quarters. All of the volatility ETPs are, to some extent. A recent post at the Inside Investing blog for CFA Institute walked through some of the most familiar complaints about VXX, and I was going to link to a comprehensive rebuttal in the comments, but I couldn’t find one. I’ve written…

VIX Option Activity and Market Returns (Update)

Monday, February 10, 2014

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The intuition around ratios of option trading volume is that large deviations from normal trading volume may indicate a significant change in investor sentiment, and especially a “capitulation” among traders near the end of a significant trend. In 2013, I wrote about the research on put-call ratios using equity, equity index, and VIX options, and concluded that, whatever their value in earlier periods of market history, these indicators don’t appear to have any significant predictive value now. During…

Are Short Volatility ETPs Worse than SPY?

Monday, January 27, 2014

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“‘Volatility Tourists’ Get Crushed,” exulted a column in Barron’s on Friday, referring to losses incurred that day by short volatility ETPs like XIV and SVXY.  I would approach the data a little differently. The median monthly return for XIV since inception is 5.0%. The trailing monthly return as of the January 24 close was -5.9%. XIV monthly returns, 2010-2014. As you can see above, investors who are interested in context of more than a few hours don’t have much to…

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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More

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