There really isn't an easy or obvious way for an investor to be highly risk-averse in this market, not when one of the biggest tail risks that people want to protect themselves against is inflation. Big investors can try taking the Taleb approach of buying large numbers of out-of-the-money options and reckoning that a bunch of them will pay off when the next crisis hits, but that's not a strategy available to most of us…
Weekly Options Volatility Tracking Report: No Surprises In Gold
Equity index options are about as evenly priced as they've been in some time, but another continuation of the intermediate-term rally would mean more disappointment for option buyers, especially those who entered new positions in early November…
People seem to be about as loss-averse empirically as they are expected to be based on smaller studies. One reason this feature of human psychology is so important is that it is one probable cause of the persistence of the variance/volatility risk premium..
I wondered last week whether we would see a return to the reflation rally or were entering a new regime dominated by mean reversion. The price action last week counts in favor of both, as we reverted to the closing highs of the prior week; I expect a more definitive answer by November options expiration…
Does the VIX actually measure fear?
Weekly Options Volatility Tracker Report
VIX: Fact Or Fiction
As I've noted on many occasions, the relationship between spot VIX and longer-dated VIX estimates has not "worked" as a directional indicator for at least several months. This looks like a genuine puzzle: the premium VIX futures traders are willing to pay and/or requiring in order to sell is too steep and has been too persistent to be dismissed as a phenomenon typical of the "wall of worry" that bull markets proverbially climb…
In my last article, I explained the reasons for entering into a bearish trade. I also provided a possible repair for a vertical spread by turning it from a bearish trade into a bullish one. However, here in this article, I will expand on what really happened to that particular vertical trade described in the previous article. I will present the scenario in greater detail which involved exiting for a profit after being in the trade for only a few days.
Is it possible to have a nearly perfect setup for an Iron Condor but not the right premium in the underlying to actually place it? Yes. Here is the what and how of it…
This article looks like a new attempt at establishing an old (but important) thesis, namely that there is a persistent volatility risk premium in options on equity index products (futures, ETFs, etc.). Most studies have attempted to define this premium in terms of option selling, and this is the first I can recall that looks at the negative returns from straddle purchases as additional evidence.