Tag Archive | "implied volatility"

Volatility Skew Webinar Recording

Friday, April 13, 2012

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I gave an online seminar on Wednesday, April 11th on implied volatility skew in partnership with TheStreet’s Options Profits service, where I am also a contributor. It was a lot of fun, and we got some great questions from participants. If you missed the event, the link below will allow you to play back or download the full webinar. https://thestreetevents.webex.com/thestreetevents/lsr.php?AT=pb&SP=EC&rID=5088857&rKey=52967bc2198a8c00 Volatility Skew and its Impact to Options Trading-20120411 2101-1 April 11, 2012, 5:01 pm New York…

Free Webinar on Volatility Skew – Wednesday, April 11

Monday, April 9, 2012

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I’m giving a free webinar in partnership with TheStreet’s Options Profits service on Wednesday on option implied volatility skew. I’m going to review, quickly, what IV skew is, present the results of our recent study for Expiring Monthly, and work through some examples of how to use skew information in timing and structuring positions. When: Wednesday, April 11 Time: 5pm ET CLICK HERE to register for the webinar You will be able to pre-register but the presentation will not be live until…

Are Volatility ETPs Like VXX and TVIX Going To Kill the Market?

Tuesday, March 20, 2012

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The theory that volatility ETPs are somehow going to have adverse consequences on the market has been a popular theme for a month or two now at least. I’ve tried to show why this this idea doesn’t make sense twice; when it comes to zombie ideas, sometimes you have to just keep trying. If you want to claim that the increased volume in volatility ETPs is causing the VIX tail to wag the SPX dog, you owe the world the…

The Cost of Hedging Equity Exposure Is Higher Than It Looks

Saturday, March 17, 2012

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BofA interest rate strategists Ralph Axel and Ruslan Bikbov suggest that now would be a good time to buy tail risk hedges. (hat tip Joe Weisenthal) 6-month options on 10-year swap futures are as inexpensive now, they claim, as they’ve been in decades, excluding one period in 2006. 6M IV on 10Y Swap Futures, bp. Source: BofA Merrill Lynch Global Research So far, so good. If rates are your key concern, this looks like a decent time to…

A Quantitative Look at Volatility Skew

Thursday, March 15, 2012

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Implied volatility (IV) skew is one of the most important and interesting aspects of listed options. IV skew typically refers to the differences in the implied volatilities of options in the same expiration cycle with different strike prices. There have been many attempts in the academic literature to model the behavior of changes in skew, but the interpretation of skew information by traders is still done largely on a qualitative and ad hoc basis. In “Quantifiable Implied Volatility Skew,”

The Problem with Volatility Skew, and Why You Should Care

Friday, February 24, 2012

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The jargon of options trading sometimes turns people off, and maybe “volatility skew” is one of the biggest hurdles. So I’m going to explain the concept in a straightforward way, and then explain why volatility skew is something you should care very much about. Volatility skew usually refers to the difference between the implied volatilities of options at different strike prices in the same expiration cycle. For the majority of stocks and indexes, options with high strike prices have low…

Unusual Volatility and Three Trade Ideas

Thursday, December 1, 2011

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In the embedded video, I look at some interesting volatility phenomena in USO options, SPY volatility skew, and VIX and VSTOXX futures. Here are the trade ideas mentioned: Short USO implied volatility / long USO realized vol: on the view that USO options are richly priced relative to likely future USO realized vol, you can sell straddles, strangles, or iron condors here and delta hedge with the underlying shares to capture the difference between current IV…

Volatility Skew Hitting Recent Highs

Monday, March 7, 2011

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I was quoted in a recent Reuters article about how the market correction has been perceived by options markets: In the SPDR S&P 500 fund, the bearish sentiment is reflected by a high skew, a premium given to out-of-the-money puts relative to out-of-the-money calls, according to the latest weekly data. “The recent volatility skew for SPY options expiring in April and May has reached levels not seen since last fall.” said Jared Woodard, principal at research/…

Implied Volatility May Be Higher Than It Appears

Thursday, November 4, 2010

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Several clients mentioned the sizable decline in implied volatility yesterday and characterized current levels of IV as too low to sell. I think I can sympathize with that intuition – after all, we’re closing in on the lowest levels seen since May, and 18% IV won’t strike most volatility traders as an obvious selling opportunity. To get a snapshot of the current level, let’s take the average of the eight nearest to the money strikes in December SPX options, as…

You Don’t Need the VIX

Tuesday, May 4, 2010

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My colleague at Expiring Monthly, Adam Warner, has taken people to task over the last several days for obsessing over the VIX, and especially for misapplying it: OK, what’s wrong with this statement: Look at that…$VIX drops below 20 and pigs fly again.  Only reliable indicator that I know of that level. If you answered “everything” you would be correct. But let’s see how far off the reservation someone can go in 140…

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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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