Volatility Views 44: Listener Mail Extravaganza
Volatility Review: Vol is down and SPX is up. Even the news of the newiPad wasn’t enough to boost the market. Don opines on Apple. Nasdaq volstill flat-lined. Euro vol — the 1-month and 3-month March contractsexpire 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 thisin earlier episodes, but I’m intrigued by the concept of VolContractsand how they work. Would the new Nasdaq products be normal futures andoptions in the truest sense? In other words, do normal strategies suchas verticals, time spreads, etc. apply in VolContracts products? Or, doI need to relearn my trading fundamentals and apply some new conceptsto fully capitalize on these instruments?
4. I hear you guys talking about the problems with using VIX as a proxyfor SPX volatility: Poor settlement, too many masters affecting theVIX, etc. So instead of VIX, I’m thinking of getting a pure realizedvol position using delta-neutral ATM straddles in SPY. The contractsize is smaller, so it’s easier for me to trade. As long as I make myhedges 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 othershoe will drop. Otherwise it’s difficult to make any predictions.
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