Nov 19, 2012
70: Stop Worrying about Black Swans
Volatility Review: Selloffs continue, though the
VIX has not changed much. VIX review. NASDAQ vol review. Almost no
change in realized vol.
Volatility Viewpoint: Some interesting topics
emerged from this week's global derivatives
Is vol cheap? When VIX cash hit 13.5 this year, the cost of the
six-month hedge was the same as the day after Lehman
VIX ETPs are problematic, part 1: They are not very adaptable to
new volatility regimes.
VIX ETPs are problematic, part 2: In the last 15 minutes of the
trading day, VIX futures are far more volatile than VIX or SPX
themselves, indicating the impact of these structured products on
seeking alpha and roll yield.
Is too much tail risk priced into the market? S&P puts and
VIX calls are priced as though black swan events are imminent and
occur with alarming regularity, as opposed to being the
rare events that they truly are.
Implied vs. realized volatility premium: Implied volatility
premium, as opposed to its realized counterpart, is higher in
short-duration VIX options. In general, this favors strategies that
sell shorter-dated options and buy longer-dated
Looking ahead at NASDAQ volatility and the