Tag Archive | "volatility skew"

Trading the Volatility Spike in YUM! Brands

Monday, December 3, 2012


YUM! Brands has been regarded for some time as a play on discretionary spending in China – as part of the shift from exports to domestic consumption. Given that framing, YUM investors are pretty sensitive to changes in data coming out of China. After the market close on Thursday, YUM guided lower on Q4 sales in China. Half of the operating profit in the third quarter came from China, so a forecast for a 4% drop in same-restaurant sales…

How Options Markets Have Changed Since 2008

Monday, August 13, 2012


Financial markets change along with the real economies on which they depend. This maxim applies to investing strategies and options markets, too. For example, the “fire and forget” approach to option selling that some traders favored in the pre-crisis world is no longer tenable (if it ever was). Risk appetites have shifted, order flow is moving into different products, and the cast of influential market agents is composed of different actors. As detailed in the attached video, here are some…

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…

Free Webinar on Volatility Skew – Wednesday, April 11

Monday, April 9, 2012


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…

A Quantitative Look at Volatility Skew

Thursday, March 15, 2012


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


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


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/…

Testing the VIX:VXV Ratio

Wednesday, November 12, 2008


This strategy buys the market when participants are overly fearful, and shorts the market when participants are overly complacent. In this study, we use the ratio of one-month to three-month volatility expectations to determine fearful and complacent market conditions. Bill Luby over at VIXandMore was the first to the notice and make use of the VIX:VXV ratio, which has now become a fairly popular indicator.  We haven’t seen much thorough testing of the ratio, and wondered how well it…


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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