Aren’t VIX and SPX supposed to correlate? What’s the disconnect?
Download Volatility Views 245: Volatility Disconnect
Volatility Viewpoint: This episode features a special guest: David Hait, Founder of OptionMetrics.
He discusses:
- A overview of Option Metrics and the Feb. 21 release on skew
- What is the flavor of choice for skew at Option Metrics?
- Why does he think we are seeing such a bid in VIX futures right now?
- How does this term structure compare to historical levels?
- What his your outlook for volatility under Trump?
Volatility Review: A look back at the week from a volatility perspective.
- VIX Cash – 11.71, unchanged from last week.
- VVIX – 83.61, also unchanged from last week.
- CBOE Skew Index – 133.6. Front month premium to cash: 1.4, less than last week. Two month premium to cash: 3.25, slightly less than last week.
Russell’s Weekly Rundown:
- VIX Options: A mild volume week. ADV – 575k. Mon – 437k, Tues – 455k, Weds – 492k, Thurs – 275k. Total 9.70m (7.04m Calls, 2.66m Puts)
- SNAP: The first big IPO of the year is off to the races. It was supposed to list at $17, opened at $24 and traded up to nearly $26.
Options Pop Quiz: If $SNAP opens at $17 what price would you give the ATM straddle expiring 3/10? AKA how much movement do you expect? (Our listeners totally called this one)
- 13% – Between $1 – $2
- 13% – Between $2 – $3
- 19% – Between $3 – $4
- 55% – Over $4 – aka over 23%
Volatility Voice Mail: Options #QuestionOfTheWeek
$VIX has already hit single digits under @realDonaldTrump. How low will it get during the rest of his term?
- 29% – It wont break 10 again
- 22% – Between 9-10
- 22% – Between 8 – 9
- 27% – Below 8
Question Number 2: $SNAP closed at $24.50. If #Options were available tomorrow would you rather:
- 45% – Buy 1 month $24 put
- 11% – Buy 1 month $25 call
- 19% – Stay the heck away
- 25% – I would rather sell premium
Listener questions and comments:
- Comment from Hawkeye – Mark, I call MAJOR umbrage for you taking credit for MY idea of calling Russell “Dr. VIX”! As you can see in the forwarded email below, I have it IN WRITING that I proposed that moniker for the good Dr. back on November 17, 2015. You should feel ASHAMED of yourself in your weak attempt to take credit for my idea, ESPECIALLY since I sat right next to you and Uncle Mike at the Lobster and Meatball fest in Chicago a couple years ago, eating tasty steaks on Sebastian dime. Have you no shame, sir? Is your memory that short? Umbrage! I hereby give you permission to send the residual checks to my PayPal account. On another note, here is another idea that you CAN keep:
The business show should use as its motto The Business Show! ?It is an audio train wreck — you cannot stop listening no matter how much you know you shouldn’t. While I am at it, I really like Nick and the new revitalized Futures shows. Even though I do not trade futures options, I still use the concepts to trade some of the ETFs/ETNs. Get the Typhon guys back on and see if you can get the Viceroy and Don S. back on for a mega-reunion show sometime. Keep up the great work! Hawkeye - Question from Kmar65 – Have you all covered the situation with Catalyst and the HFXAX fund recently? I try to get to all the webcasts but must have missed it if you had. Expected max drawdown was 5% and they blew through that. Gives one cause for pause re options strategies. would be great to understand how it happened and how it could/should have been avoided. Thanks in advance!
Crystal Ball: Your prognostication headquarters
Last week:
- Mark L. – 11.25
- Mark S. – 11.50
- Russell – 12.34
- Guest – 12.65
This week:
- Mark L. – 11.55
- Mark S. – 11.00
- Russell – 12.00