Here?s a chart I sent out to clients last week as part of our weekly update. It tracks the ratio of three-month SPX implied volatility as measured by VXV to the trailing 3m historical volatility.
VXV Is Way Ahead of You
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130/30 Strategies as Expensive Beta
Only a few years ago, 130/30 funds were all the rage. They allowed equity managers who had traditionally been bound to a long-only strategy to make use of short exposure to shape their portfolios.
Citi Economic Surprise Indexes for U.S. and Asia-Pacific Diverge
Here is one explanation why so many analysts have been bullish on U.S. equities this year versus emerging markets.
Barclays (BCS) Shows Lending Momentum with IV Skew at a Multi-Year Low
After being down nearly 20% over the summer, Barclays shares have rallied steadily through the fall and are set to close the year with a 35% gain. In spite of recent performance, the bank is still trading at a 25% discount to its peers.
Trading the Volatility Spike in YUM! Brands
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.
Rising correlation and stock volatility
In 2011 and early 2012, one of the big themes was the elevated correlation among individual stocks. In the ?risk on, risk off? environment, investor appetites for stocks were indifferent to the fundamentals of particular companies: trades were all about the macroeconomic risks.
A Prisoner’s Dilemma for Weekly Options
Weekly options may be good for traders, but fragmenting the distribution of options order flow across time makes analysis more difficult.
Why Taleb is Wrong About Markets and Uncertainty
Once you cut through the layers of purple prose and elective neologism, Nassim Nicholas Taleb?s central thesis is not hard to understand: people often know less than they think that they do, and some human affairs are arranged so that they are negatively, neutrally, or positively affected by surprising events.
Fear of the Unknown: Volatility of Volatility Predicts Stock Returns
Measured as the standard deviation of log returns, volatility is widely regarded as a synonym for risk, and option implied volatility denotes the expected risk for an asset.
Financial Innovation and Complexity
It's become really popular in the financial media to rail against the complexity of financial products. For products offered to the public, those complaints seem justified.
Is the Thread of Airstrikes Against Iran Driving Oil Options Prices Higher?
Think of this as an estimate of how richly or cheaply priced options on crude oil are, relative to the actual historical volatility of the asset.
Credit Markets Sniff, Pundits Declare Pneumonia
I thought it would be worthwhile to get some perspective on a few risk metrics.