Mar 12, 2012
Volatility
Views 44: Listener Mail
Extravaganza
Volatility Review: Vol is down and SPX is up. Even
the news of the new iPad wasn't enough to boost the market.
Don opines on Apple. Nasdaq vol still flat-lined. Euro
vol -- the 1-month and 3-month March contracts expire
soon.
Listener Mail: Nasdaq VolContracts, TVIX, the
nature of VolContracts, and avoiding the VIX.
1. Will the new Nasdaq VolContracts be exclusive to the
Nasdaq, like the Euro and CME, or multi-listed?
2. What's your take on the ongoing TVIX drama? Cause? Was it
shady? Is TVIX done?
3. I'm new to the show, so I apologize if you guys have
discussed this in earlier episodes, but I'm intrigued by the
concept of VolContracts and how they work. Would the new
Nasdaq products be normal futures and options in the truest
sense? In other words, do normal strategies such as
verticals, time spreads, etc. apply in VolContracts products? Or,
do I need to relearn my trading fundamentals and apply some
new concepts to fully capitalize on these instruments?
4. I hear you guys talking about the problems with using VIX
as a proxy for SPX volatility: Poor settlement, too many
masters affecting the VIX, etc. So instead of VIX, I'm thinking
of getting a pure realized vol position using delta-neutral
ATM straddles in SPY. The contract size is smaller, so it's
easier for me to trade. As long as I make my hedges and
adjustments accurately, this should be a vastly superior
proxy for the true S&P volatility. Am I correct or am I
nuts?
Crystal Ball: Non-farms may be a non-event. Load
up on VIX downside. Hopefully the Nasdaq vol can break out of
this flat line and the other shoe will drop. Otherwise it's
difficult to make any predictions.