Mar 12, 2012
Views 44: Listener Mail
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.