WTI crude oil options are priced at a substantial premium above the trailing volatility of the underlying. One month options using the VIX methodology (OVX) were priced at the Friday close above...
Water is one of those investment themes that comes up from time to time. It seems like there are a few different stories:
Delivery. People understand this story intuitively: everybody needs water, some places don’t have enough of it, and since you can move it around in bottles and pipes, water is an excludable good. Excludable goods can be profitably sold.
Technology and Filtration. Water delivered where you want it does no good if it’s dirty, or if it…
Probably. First, some context. Here’s the one-month volatility risk premium in USO options since 2007.
Think of this as an estimate of how richly or cheaply priced options on crude oil are, relative to the actual historical volatility of the asset. Any ratio above 1.00 indicates that option buyers were willing to pay a premium above the value of the volatility subsequently exhibited by crude oil futures. As you can see, the ratio is usually greater than one.…
In early September, I tried to take the other side of the case against UNG, the popular natural gas ETF, regarding its perceived failure to track spot natural gas prices (“The Fuss Over Natural Gas“). At the time, I admitted that my defense – roughly, “it isn’t as bad as all that” – was anecdotal and didn’t address any sof the fundamental worries that caused the dislocation in the first place. I also warned that UNG shareholders…
Volatility Tracker for the week of November 8, 2009
I wondered last week whether we would see a return to the reflation rally or were entering a new regime dominated by mean reversion. The price action last week counts in favor of both, as we reverted to the closing highs of the prior week; I expect a more definitive answer by November options expiration.
The sale of out of the money equity index puts and/or put spreads I suggested last…
People have been up in arms for months now about the troubles at the United States Natural Gas Fund, LP (NYSE: UNG), the ETF designed to track the price of natural gas. And, as far as I can tell, rightly so: the whole point of ETFs is that they were meant to be a nearly frictionless, relatively simple alternative to the clunky closed-end funds (CEF) and managed products that our parents and grandparents had to contend with. But UNG recently…
Monday, January 14, 2013
0 Comments