Tag Archive | "S&P 500"

A Long Term Look at the S&P 500 Volatility Risk Premium

Monday, August 12, 2013


Some clients here and readers on Twitter asked for a long-term look at the relationship between the  historical volatility of the S&P 500 and the implied volatility of SPX options. The chart below shows those two time series since 1986, using a one month estimate for historical vol and the VXO index for implied vol.* All of the charts below can be enlarged with a click. The statistic in which most traders are interested is the difference between those…

Volatility Skew Webinar Recording

Friday, April 13, 2012


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…

The Problem with Volatility Skew, and Why You Should Care

Friday, February 24, 2012


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…

Is the Market Getting Too Quiet?

Tuesday, January 31, 2012


The market has not been this docile in more than eight months. The short-term volatility of the S&P 500 dipped below 10% in mid-January, and the market has kept getting quieter as stocks churn flat-to-higher. The temptation when stocks get this quiet and options become this cheap is to assume that volatility will soon revert higher. But before speculating on rockier markets up ahead, it is worth looking back at how similar markets have fared historically. Fig. 1. SPX…

Volatility Tracker: Why Index Volatility Is Holding Steady

Monday, December 14, 2009


Volatility Tracker for the week of December 14, 2009 My sense of the markets at this juncture is that elevated implied correlations are truthful, even oracular, [10] with too-high index implied volatility representing not so much the jump risk with which the VIX is usually associated as the unwelcome prospect of individual equities tracking each other too closely. The most urgent scenario is of a strengthening dollar and unwinding “risk trade” in which good and bad companies are punished alike,…

VIX Fails to Give You a Pony

Monday, December 22, 2008


If the VIX could talk, right now it’d be saying, “The reports of my death have been greatly exaggerated.” The titular claim of a recent Bloomberg article, “VIX Fails to Forecast S&P 500 Drop,” only makes sense in a world where nothing occurs beyond one standard deviation of predicted outcomes.  The fact that the October decline was more than one standard deviation from the mean as predicted by the VIX is just another way of saying that the October…

November Monthly Review

Sunday, November 23, 2008

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In last month’s review, we noted that extremely volatile market environments can sometimes be your friend: The good news is that, as we’ve been advising our subscribers, periods following intense market selloffs historically have been the most profitable ones for our strategy, and as implied volatility has already declined from its earlier peaks, we are already seeing some fantastic profits on our positions for the November cycle.  An elevated volatility environment is torturous for swing traders and ulcer-inducing…

October Monthly Review

Sunday, November 2, 2008


Two types of traders really thrived in October – the uber-bearish, and the nimble.  Since our Condor Options newsletter follows a non-directional strategy, we aren’t poised to profit from market swings.  But we do try to be nimble, and subscribers were subjected to a rather unrelenting series of pleas for caution and for a move to cash throughout September and October. On September 12, we said that we were “trading small” and were “cautious – as we get…

VIX Futures Market Outlook

Friday, October 17, 2008


It’s been interesting to watch the VIX futures over the past few weeks.  While the action in SPX options has pushed the cash VIX up to fascinating extremes, the longer-dated VIX futures have been somewhat less responsive, as you’d expect.  Which is not to say that VIX futures have been unresponsive. The chart above displays the cash VIX and current VIX futures prices as of about 10:00AM EST on October 17, 2008.  This term structure says two significant…

Choppy Waters Ahead

Tuesday, October 14, 2008


We mentioned yesterday evening in a note to subscribers that in the past, high volatility environments have been the best times to sell option spreads.  Rising volatility alone isn’t a sufficient signal – as anyone who was short volatility during the past few weeks can attest.  But once high-flying implied volatility readings turn the corner or flatten out, that’s often a good time to sell premium at those elevated levels. From a directional perspective, there are signs that, two…


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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