Archive | Volatility Tracker

Volatility Tracker: Options Fairly Priced

Monday, February 1, 2010


Volatility Tracker for the week of February 1, 2010 This week saw realized volatility rise to meet last week’s spike in implied levels, although as I mentioned those spot implied levels weren’t easily sustainable. [2] I’m not the world’s greatest proponent of technical analysis, but the price charts for equities and oil deserve a look. Failure to revert toward recent averages would be further confirmation of the ill health of this market. [4,15] With a less than one-point range…

Volatility Tracker: Fear Returns

Monday, January 25, 2010


Volatility Tracker for the week of January 25, 2010 Implied volatility exploded in equities last week as markets were ravaged to the tune of…four per cent? [2] The term structure of implied volatility and the ratio of implied to realized volatility all moved back towards even, indicating how accustomed we had become to substantially overpriced options and contangoed VIX futures. [6,7,8] Implied volatility is now unsustainably high -unsustainable, that is, unless you expect two-thirds of trading days to begin…

Volatility Tracker for January 19, 2010

Tuesday, January 19, 2010


Volatility Tracker for January 19, 2010 Last week, I noted the very wide spread between short-term realized and implied volatilities. Although the selloff on Friday alleviated conditions slightly, [5] the spread is still large enough that traders inclined to be net sellers of options need not fear occasional daily increases in realized volatility. [6] The smartest trade in equity index options at this point might be to sell the wings and buy the guts on a dollar-neutral basis, delta-hedging…

Volatility Tracker for the Week of January 10, 2010

Monday, January 11, 2010

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Volatility Tracker for the Week of January 10, 2010 The continuing rally in equities has resulted in some remarkable volatility readings. 21-day realized volatility in the S&P 500 closed below 10% on Friday [5], and the spread between 21-day realized volatility and spot implied volatility 30 (calendar) days ago is wider than at any time in 2009.[6] While option implied volatility regularly tends to run higher than the realized volatility in the underlying, current readings are extreme. Since equity…

Volatility Tracker for the Week of January 4, 2010

Tuesday, January 5, 2010


Volatility Tracker for the Week of January 4, 2010 The traditionally quiet holiday season did not see point-for-point declines in implied volatility. As a result, the distance between recent realized and lagged implied volatility is about as wide as it has been for some time, indicating that options were richly priced over the last thirty days. [5,6] The S&P 500 continues marching along the upper limit of its one standard deviation band. [4] VIX futures are relatively unchanged versus recent…

Volatility Tracker: Negative Dollar Correlation

Monday, December 7, 2009


Volatility Tracker for the week of December 7, 2009 The jump in volatility indexes noted in our previous report was met with a similar decline last week.[2] The VIX could easily make a new 52-week low before 2009 is through. Gold implied volatility advanced sharply on Friday’s price decline [3], with GVZ closing just shy of my 30% short-term target. The shift in the volatility skew in gold deserves attention: if traders continue to pay higher premiums for downside protection…

Volatility Tracker: Repricing Debt Burdens

Sunday, November 29, 2009


Volatility Tracker for the week of November 30, 2009 Volatility indexes popped across the board on the Dubai news last week. [2] If traders are concerned about the effects of this particular event, their reaction is overblown – as is already clear, most of the direct exposure to Dubai World appears to rest with HSBC and some Continental European banks. It seems smart, however, to be thinking about the significance of debt burdens in other countries, and about…

Volatility Tracker: No Surprises in Gold

Sunday, November 22, 2009


Volatility Tracker for the week of November 23, 2009 News-making price changes in gold [11] have not been accompanied by any particularly noteworthy behavior in the options market. While it would be wrong to suggest that options in any way “anticipated” the gold rally, it is also fair to say that price action in the underlying has been roughly in line with the expectations given by option prices.  Notice that the CBOE’s VIX-style gold volatility index (GVZ) has drifted between…

Volatility Tracker: Stock-Picking Might Matter

Monday, November 16, 2009


Volatility Tracker for the week of November 16, 2009 Equity index options are about as evenly priced as they’ve been in some time [5,6], but another continuation of the intermediate-term rally would mean more disappointment for option buyers, especially those who entered new positions in early November. The ratio of short-and long-term (Jan 2010 vs. Jan 2011) implied correlation is getting noisier, but is also challenging its lows for the year. At the Volatility Trading Summit earlier this month, several…

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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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