On this episode Mark is joined by:
- Andrew Giovinazzi, The Option Pit
- Russell Rhoads, Kelley School of Business – Indiana University
- Gary Norden, NN2 Capital
They discuss:
- The latest in the volatility markets in the US
- The international volatility market (VSTOXX)
- Interesting trading activity and developments in VSTOXX,
V-VSTOXX, VIX, SVIX, UVIX, UVXY and VXX - Their Crystal Ball predictions for VIX and VSTOXX
- And much more…
Brought to you by Eurex and Public.com
TRANSCRIPT
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Welcome to Volatility Views, the premier program for volatility traders.
Each week we’ll take a deep dive into the world of volatility with in-depth analysis, trading activity reviews, strategy breakdowns, cutting edge education, and much more.
We’ll also bring you exclusive conversations with the traders, researchers, and asset managers who are reshaping the volatility landscape.
If it involves volatility, then you’ll find it on Volatility Views.
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And now it’s time to take a deep dive into the world of volatility.
It’s time for Volatility Views.
All right, everybody.
That music means we are back.
Once again, it is Friday.
It is noon central.
It is 1 p.m. eastern.
You know what’s going on in the world of vol?
Let’s find out together, shall we?
It is time once again for Volatility Views.
My name, of course, Marc Longo from theoptionsinsider.com.
Couple of things in your mind right at the top of the show.
First off, you’re not listening to the full network.
Man, you are missing out.
Nearly a dozen other shows.
And if you want to go above and beyond, you want to join us after Volviews for a little bit of Options Oddities fun.
I will be joined by the Options guy himself, Mr.
Brian Overby, to break down some awesome unusual activity.
It was lighting up our tapes this week.
Only one place to get that.
Theoptionsinsider.com/pro is the place to go to learn more.
As we learn who’s joining us on the old Volviews program today.
First, we return once again to the dark, the stormy, the hellacious shores of me, where we are joined once again by the Rock Lobster, Mr.
Andrew Jovanazzi from optionpit.com.
Mr.
G, welcome back to the show, sir.
It is a pleasure to be here, although I’m in North Carolina, but I won’t be for long.
Oh, so the stormy shores of North Carolina then.
Yeah, and actually, these are pretty stormy.
I go from one set of stormy shores to another.
Yeah, you can’t stay away.
It can be quite stormy here in North Carolina.
You can’t stay away from stormy shores.
It’s just your thing.
Maybe you go inland, try a landlocked vacation next time.
Just try.
And just let the rain come down in the trees, I guess.
But I don’t know.
I somehow, I’ve managed to live on a coast.
I guess you can call Chicago the third coast.
So most of my days somehow.
It does have quite the coastline here.
So yes, we are an inland coast, but a coast nonetheless.
As we keep on rolling out to, I’m not sure where he’s beaming in from.
Maybe he’s beaming in from Indiana, maybe from the hinterlands of Chicago, maybe from Budapest.
But let’s find out.
He is Mr.
Russell Rhodes holding court these days at the Kelly School of Business.
Mr.
Rhodes, welcome back to the show, sir.
Western suburbs of Chicago.
My new office office that I go to flooded yesterday.
So I’m working from the emergency backup area.
Hey, Andrew, are you visiting our buddy, the option guy, while you’re over in North Carolina?
I know I caught Andrew off guard right there.
Oh, is that Carol?
I think he’s in South Carolina.
Oh, Carol’s in South Carolina.
I’m talking about overbeat.
Oh, no, no.
Where is he in like, where is he on the coast or is he in like Raleigh or something like that?
He’s on the coast or something because he’s got a house, both.
That’s all I know.
So I’m like a big city person.
I think everybody in North Carolina all lives in the same exact spot.
Exactly on the same body of water this year in the water, which is not totally incorrect.
No, not at all.
I’ll be talking with him in a little bit.
So I will ask him exactly where he is hanging his hat.
That’s what I thought.
I’m great at the lead in segue thing.
And now to Gary.
Yes, thank you.
Thank you, Joe.
And then of course, holding down the U-Rex hot seat this week for the second time, but his first time really on the show proper.
He did beam in for a special international ball segment.
He gets the award today for beaming in all the way.
He gets the Simon award for beaming in all the way from Perth.
Simon used to beam in from Sydney.
He’s beaming in from the other coast, Perth, Western Australia, where we are joined once again by Gary Norden, head fund manager at N N squared capital.
Gary, welcome back to ball of you, sir.
Thank you very much.
Great to be here.
All the way from sunny Perth.
I’m not saying right now, it’s two o’clock in the morning, but all the way from Perth.
You get the award for the late night ball contributor.
All right, we’ll get going.
So we don’t keep you up too late as we head right on into the volatility review.
It’s time to break down the latest developments in the volatility trading world.
It’s time for the volatility review.
All right, everybody, welcome to the vol review, the portion of the show we break down.
What the heck is lighting up our tape out there in the vol market today and indeed this week and coming into the end of the week here.
We’re seeing a wee bit of red on the screens markets taking a breather after putting on a lot of green post election.
Pretty much all of them off about the same percentage and as Dak S and P and Dow all off in the ballpark of a quarter percent S and P a little less Dow a little more, but all in that ballpark of around a quarter of a percent.
And all that red means our old pal Bix cash actually firming up a wee bit since last week.
We’re at about a 13 even on the show last week.
This week, ticking up about a point in a quarter right at 14 and a quarter when we kicked off the show.
Vol of vol also firming up a bit as well up to an even 100 up 13 points from where we were this time last week.
So markets a little red vol a little frothy a little spicy heading if you can call a 14 and a quarter spicy listeners heading into the weekend.
Let’s go around the horn the opposite of the way we started.
Let’s go out to the U-Rex hot seat first.
Gary, we’ll get to all the international vol fun in a second, but what’s catching your eye in the broad vol markets this week, sir?
I think today’s interesting from, well, to sleep a bit a few hours ago to wake up and see the VIX up here.
It looks a little bit high to me actually, frankly, given what’s going on.
I think we’ve it’s, you know, all of it’s just more of the same, which I think is we’ll probably talk about during the rest of the session, but I think that’s what’s going to be the way for most of the next sort of two or three weeks.
So I think the VIX is interesting.
I think that that taking up gradually over the last sort of a few days has been, I think, quite interesting as well.
And that might be getting people a little bit spooked a bit now as well, I think.
But generally, yeah, I think VIX looks a little bit high this morning and I’m a little bit surprised it’s so high.
I like that.
That’s commitment to the cause, sir.
Having a nap just to get ready to come back on for all of you is I appreciate that, sir.
Well done.
So you’re refreshed and ready to talk some ball in the wee hours of the morning.
Absolutely.
As all good ball talkers do out there as we keep rolling out to the he just got a new office.
It’s already flooded.
Listeners, he’s rocking some bad luck.
Let’s go to the secondary office of one once and future Dr.
Vic slash V stocks.
Mr.
Roadster was catching your eye in the ball markets right now.
Next I’m surprised that December’s given us about 75 cents right now relative to where spots at.
Actually, I say that and it bumped to six to 70 cents when I said that.
So but you know, you never know what could happen this weekend.
So I could see I could see the futures market bracing a bit just in order to have a little bit of room between if you’re going to sell some of those VIX futures going into next week, I can totally see the the reason that there’s a little extra premium in there.
You know, Russia fired a whole ton of stuff at Ukraine this weekend.
Maybe they fire a whole ton more.
Maybe Ukraine fires a whole ton back.
Maybe you know, and and now we got a new one in geopolitical chess.
If anybody has a bingo card for 2024, so much has happened.
I assume everybody’s one at this point.
But Syria falling apart, I guess if you really thought about it and thought about who is the backer of a side that probably is not that big of a shock.
But again, every, you know, all the dominoes start keep falling around the world as far as geopolitical hotspots and VIX is too young to drive.
And for Gary, you have to be 16 to drive in the U.S.
You’re right.
It does seem, I should say, like there are a lot of interesting shoes dropping on the geopolitical front.
But we’ve seen this movie before now, dare I say it, unexpected, maybe unanticipated geopolitical event pops off and VIX shrugs its shoulders and the markets do not rally.
How many times have we seen this post 2020?
So I guess file me as unsurprised, but still interesting stuff afoot as we go out now to the shores, the dark and stormy shores of North Carolina.
Mr.
Rocklopster was catching your eye out there in the ball markets this week.
I would say is we are now like market pretty close to all time highs, like 6,100 SPX.
So we’re 1% away and VIX one, two, three days.
You know what, it’s just it’s kind of it’s stubbornly holding up when you think it should be dropping.
It’s kind of like, you know, the Godfather with Marco Corlan, just when I’m out, they pull me back in.
I’m paraphrasing and something like that.
But I feel like we should see like the low 12 handle at this point and we don’t.
So why?
Today is the 13th.
A month from now is January 13th.
We are getting into that, you know, certify the election, Jan 20th, all that kind of stuff.
So you know, I think there could be a little bit of that creeping back because it’s certainly not right.
It is certainly not realized well in the index because now we’re on a we’re actually now the 60 day volatility is below 11. 10 day vol is seven and a half.
So yeah, you can’t really look at that for vol interest rate.
And I think this inflation number, like there was some surprise in the inflation number this week, it’s not going down anymore.
OK, so whatever you hear out of the White House, I don’t know how they spin it, but it’s definitely the trend is not going down anymore, starting to tick back up.
So I like slightly different cross currents and, you know, bond market not liking rates either, even though they keep saying they’re going to cut bond prices keep going down.
So anyway, I think, you know, things that have scared the market, you know, kind of the bond market collapse as if the government doesn’t follow through on some of these spending cuts the current minute where the new administration wants to do that would be door number one.
Door number two.
Yeah.
This unrest in Ukraine.
Same thing because I think the last time we had a sell off since the election was all Ukraine related and that was SPX down to 5850 maybe.
So that could be in the back of trade, you know, kind of in the back of traders minds.
Let me see.
I want to get that.
Yeah.
That was the low point for since the election was 5850 right around there.
So you know, we could get there again, possibly, I guess everybody’s trying to freak out somewhat.
But I mean, for the most part, AVGO earnings were pretty good.
They loved it.
Market started off this morning pretty hot and it just did not hold up.
Actually, we kind of called this leash an eye in our morning show like, you know, it looked good like the market looked good, but I just I didn’t like I don’t like how VIX is not in the 12 handle for where we are.
It should be there, but it’s not.
So that means there aren’t enough people selling puts quite yet.
And I think that’s where we find ourselves.
So it’s just you would want you would think vol should be lower when we’re at like all time highs.
We’d be in zone one, the bottom quartile, but we’re not.
So I just have to say, I find that curious and it gets my Spidey sense it up, senses up.
And I think we saw in one of us here, I think it was Gary mentioned VIX is by 100.
Why?
Who’s buying that crap?
Who wants to own VIX or any vol and volatility when we’re, you know, when the market is trading where it is?
Okay, so you buy it because you think we’re going to market sells off, but like almost 100 VIX for where we are is quite a bit.
So again, I find there’s too many troubling signals then of course, VIX expires on January 22, which is two days after inauguration.
So that’s almost two, you know, two it it’s too odd to have VIX expiring after that.
But I have seen a lot of call buyers come in.
I guess we’ll talk about that a little later, but there has been some sized call buyers on some strikes lately.
So I don’t know if it’s 50 cent, but it’s certainly somebody’s buying calls.
Interesting.
So the rock lobster saying VIX is, is still maybe a little too high.
And Mr.
Dr.
VIX thinking VIX should be at least driving right now.
So intriguing, intriguing viewpoints as we keep on rolling out there into the land of the future is what’s lighten up the tape over there on the ball surface this week.
And coming into the start of the show, we had the VIX futures, at least the front portion of the curve looking a little bit juicier than it was this time a week ago.
These future, which is obviously rapidly heading for the exit up about three tenths of a point, Jan ticking up more.
Talk about Jan for a while as an intriguing little hotspot here on the curve.
Jan’s up nearly half a point from last week, 0.45.
So Jan kind of off to the races doing its own thing.
If we go all the way out, let’s go all the way out to August of next year, listeners, and see how spicy we get on the vol curve.
We get to a little bit north of 1919.1 out there.
So still not sniffing a 20 handle, but obviously looking a little bit steeper the farther out we go here on the curve.
Gary, we’ll start with you again, sir.
I’m curious for you how big of a driver in your analysis is the volatility surface and what if anything is catching your eye out there this week, sir?
Yeah I think it’s I think we’re going to be in one of those situations now for a while that essentially I don’t think it matters what realize all does.
I just think that everybody seems to think that there’s going to be a lot of stuff happening next year, you know, come middle end of January.
And I think everybody’s just bracing themselves for a whole raft of announcements and things.
So even in the next one, two weeks or so, it doesn’t matter how low I realize for all those.
I just think that to some degree, both implied and implied vol and the futures curve for the VIX are going to stay high.
And that’s what we’ll probably see in the options flow as well.
So I just think it’s what we have to get used to.
So ultimately, I think perhaps some of the longer dated ones, I think that could flatten off at some point because you would expect if there’s going to be some market moving announcements they would probably happen quite early in the next administration.
But I mean, you guys in the States would probably know more about that than me.
But I think we’re just going to have to get used to this environment now for at least the next two, three weeks or so up until the event happens at the end of January.
So yeah, I think this is the way it’s going to be.
Yeah, we’re getting back into that environment where a single tweet could change markets quite a bit.
Listen, remember those days, the heady days from 2016 to 2020?
Well, you never know what tweet was going to turn the market.
We’re back in those days again, listeners.
So it should keep things at least interesting for the next four years from a vol perspective.
Mr.
Doctor Vic, same question for you, sir.
What’s catching your eye out there on the vol surface this week?
Surface but just VBIX a tick over 100.
As Andrew was talking, I threw into our little internal chat that maybe one of the reasons VIX has a 14 instead of a 12 handle is because there maybe there’s a little extra demand for SPX puts going into 2025.
Maybe this is the second to last full trading week of the year.
And just maybe some institutions with us closer to highs are maybe putting on some hedges going into the first quarter of next year, which is something that would boost VIX.
It also is something if the same sort of players are maybe taking a look at hedging against a quick move down.
We know that VIX calls are one of the best ways to go about doing that and that VIX call activity tends to drive the VBIX.
So VBIX over 100, maybe that’s a little bit of confirmation that it’s not that VIX is elevated due to concerns over the weekend, but maybe VIX is a little elevated relative to where we think it should be because of concerns 30, 60, 90 days out.
And Mr.
Dark and Stormy Shore, sir, what’s catching your eye out there in the vol surface this week?
You know what?
Funny enough, with the option pit fair value indicator for the volatility surface, this last I would say week or so is the first time we have been at around a fair number.
So this of course is based on my highly scientific looking at the VIX curve for years and years and years, making some observations and then one of our smart guys created a regression line to match that.
So anytime it kind of flutters above and around that, I feel like all the forward vols are kind of out of sync relative to where– sort of like back month is a little out of sync relative to front month, if that makes sense.
So the back month VIX future, a little higher relative to where VIX cash could be or vice versa, the front end of volatility or SPX vol is relatively high to the back given the absolute value of VIX.
So this was all run at around a 12.
So that way, when the market is starting to move a little bit and the futures are moving, vols kind of give me a sense of how– let’s just say how prickly the market is, the market for volatility.
So right now, it’s very normal.
So that is to say volatility is priced higher in the back than the front, which is how it normally is.
And with relatively low realized vol, you actually have a normal high risk premium, which is kind of how the market trades when things are sort of good.
So with all the stuff that we have just mentioned, things don’t look too out of sync as it goes, I think, for the vol surface where we are.
So it’s like, OK, we’re going to– it’s basically the market’s pricing vol– some extra vol premium because something might happen, but that’s sort of normal.
And I think that’s where we are.
But it’s nothing yet, I would say, that would get me excited.
The only thing is, I think VIVX feels a little relatively high.
And that comes from traders buying calls in VIX.
So that’s what I would say with that surface.
So kind of a little of this over here, normal vol surface, but still that relatively high vol vol in the short term.
All right.
Now it’s time for us to cast our gaze outside of these shores of the US across the pond, not all the way to where Gary is.
That’s a little too far.
We’re going to stop in between over there in the Eurozone for a little bit of the old international volatility review.
It’s time to explore what’s happening in the volatility market beyond our shores.
It’s time for the International Volatility Review.
The International Volatility Segment is brought to you by UREX, home of Euro Stocks, V Stocks, DAX, and the German government bond-based Eurobund, Eurobabel, EuroShots derivatives.
UREX is the leading European derivatives exchange.
Learn more about trading V Stocks futures and options, the European volatility benchmark at www.urex.com/vstocks.
All right, everybody.
Welcome to the International Volatility Review.
And kicking off the show here, we had our old pal V Stocks closing this morning at 13 and three quarters.
So for a while there was pretty much moving in lockstep, pretty much exactly even with VIX Cash.
Obviously VIX continuing to do its own thing throughout the rest of the session out there.
But for a while there, that premium between the two, that distance was gone.
That puts us down almost three quarters of a point from where we were this time last week.
Some of you out there, given what Russell was saying earlier about maybe some escalating tensions over there in Ukraine, as well as some other surprise developments out of Europe this week, surprise rate cut, aggressive rate cut out of Sweden, half point they went over there, which is kind of interesting.
So a lot of things going on over there in the Euro zone that are maybe a little bit head scratching, maybe a little bit puzzling.
Either way, V Stocks doing its seasonal thing.
Remember this time almost exactly a year ago, listeners, December 15th of last year, we were at our 52 week low of 12/12.
Not that far away from here right now.
Obviously not quite kissing 12/12 yet, but V Stocks likes to do its seasonal best.
And so far it is living up to that, listeners.
The high of course coming back on August 5th of this year, 31/16.
Obviously that’s a long way in the rear view mirror right now.
But yeah, it doesn’t seem like a lot can really conspire to keep V Stocks up right now.
Mr.
Rose, we’ll start with you, sir.
What is catching your eye out there in the international volatility market, sir?
There’s a lot.
There’s an awful lot.
So I’ve talked an awful lot in the past few months about there being differences or differences, differentials between V Stocks and VIX and some of it’s because we had a Paris, we had an election in the France and that wasn’t being paid as much attention to in the US.
We had the US election, which the US volatility and V Stocks were kind of elevated for.
V Stocks returned to a bit of normalcy a lot quicker than VIX did after we got the election result.
Right now, the December V Stocks is at a slight discount to VIX and the January V Stocks is at a slight premium.
So there might be something you could actually do calendar spread wise if you think something may be happening in the next couple of days.
But as we go farther out on the curve, everything is kind of in line with each other.
The one big differential in something that I don’t think I’ve ever talked about on here, but much like there’s a V VIX, there’s a V V stocks and we mentioned that V VIX is up around 100.
The V V stocks is around 80.
So options on the V stocks are cheaper than VIX options as well right now.
So the futures are kind of in line with each other.
If you’re looking for some sort of volatility spike that would impact all markets, you may want to be looking in the V stocks arena as much as looking in the VIX arena, maybe even more so in the V stocks arena.
Because it has been shown that when we get a volatility event, the futures on V stocks tend to react more to the upside than VIX.
All right.
Let’s keep going out now to the Yurks hot seat.
Mr.
Gary, sir, what’s catching your eye out there in V stocks and international volatility this week?
Yeah, thanks.
I think Russell made a really good point about the fact that the volatility of V stocks is quite low and much lower compared to the VIX.
I think that is an opportunity.
In terms of I think most people probably surprised by how V stocks has fallen and sort of disconnected a little bit, particularly the last day or so from VIX.
And I wonder how much of this has to do with the fact that Europeans tend to like longer holidays or Christmas time.
And so a lot of European desks will close for longer.
And so maybe people are really looking ahead to that as well, whereas in the US, you guys tend to be a bit more hardworking.
I think I can say that.
And some of you guys will be in trading a bit more.
I think generally, there just seems to be, to me, so much more room for volatility events in Europe, even given the fact that we have this new administration coming into the US in January, there’ll be a lot of changes.
I think because on an individual stock basis, I think there’s so many companies in Europe that are struggling.
So I think that the risk of downside shocks in European companies is stronger than it is for US.
I think US companies are generally doing better.
And if the companies are doing better, there should be less chance that the index itself is going to fall.
So I think that there are some opportunities going forward there.
And in terms of the geopolitical situations, obviously France is onto its next prime minister now or certainly someone’s been nominated.
I expect that to get tested at some point as well.
And in terms of Ukraine, I think most people right now are just thinking that there will be some deal done in Ukraine over the next few weeks or a couple of months or so.
I think that’s driving things in that sense, no matter what happens in terms of if there’s a tax on Kiev or in the short term, I think most people now expect that the sides are going to be sitting around a table trying to do some kind of a deal within the next two to three months.
And maybe that’s one of the reasons why V stocks is falling.
But I still think there’s opportunity because the companies themselves and the economy is struggling in most European economies are struggling.
Like you mentioned the 50 basis point cuts this week.
Europe is struggling.
So I think any opportunity where V stocks looks a little bit cheap is an opportunity.
I like it.
At the end of the day, with all the various uncertainty, at the end of the day, it’s really just Europeans like a good long holiday.
I could certainly get that’s why V stocks is coming in.
They’re just not there.
They’re already partying over there.
I like that.
I can get behind that analysis at the end.
And you’re right.
You know, Trump did a roll into office on the pledge that he was settled on day one over there in Ukraine.
So we’ll see.
We’ll see what’s behind all that talk out here at the end of the day in a few weeks as we keep on rolling.
Is there a lot of talk or is there some action in VIX options today?
Listeners.
I guess your frame of reference.
This was back on the banger days were threatening a million contracts a day.
You’d think this was mostly a lot of talk right now.
The ADV is back below 700 K 698 down another 87,000 contracts this week.
So in that context, 407,000 contracts is nigh on respectable.
Listen, that’s what we’re dealing with today.
We’ll get to all that fun in a second.
First, let’s break down our patented VIX top 10 indicator.
TM listeners.
What does it cost you to break into the top 10 right now?
It cost you 202,000 contracts.
By the way, we are back to 50 50 exactly for a brief shining moment in time.
Listeners puts we’re leading the dance over calls and the VIX top 10 no longer.
We are back to 50 50, which in and of itself is a pretty a barren thing.
If you’ve been listening to volvues for any length of time, you know VIX is mostly all calls all the time.
So seeing this many puts in the top 10 is certainly interesting.
And number 10 is one of those puts cost you 202,000 contracts to break into the top 10 right now.
That is nothing that needs that that gets you to the DS 14 half puts.
You like those listeners?
Maybe you prefer number 9, 203,000 of the Jan 22s.
Number eight also to the calls 210,000 of the DS 20s.
Number seven right back to the downside 227,000 of the DS 14 puts.
Number six, 233,000 of the Jan 17 puts.
Number five, 238,000 of the DS 15 puts.
Then we got some calls here.
Number four, 246,000 of the Jan 30s.
If that’s a little bit too far out for you, how about number three, 253,000 of the Jan 20s.
And you know, if you said to yourself, you know what?
I need to go farther up the strike chain than that.
We got number two for you.
Two to 75,000 of the Jan 50s, five O’s.
And then number one with the bullet yet again, this week, listeners, the strike that I infamously said might be a bit of a bridge too far a few months ago.
And now we’re hanging out all over that range.
This is the DS 13 put 425,000 contracts on the table.
The end of the day listeners just goes to show never undersell seasonality, especially around the holiday season when it comes to the vol market.
Hey, half of Europe’s already on vacation as we just established in the international vol review.
But now it’s time listeners to see what’s lighting up the tape here on the weekly vol front.
It is time for Russell’s weekly rundown.
Now, Russell’s weekly rundown.
Now, Russell’s weekly rundown.
All right, Mr.
Rhodes, the floor is yours.
What caught your eye on a relatively quiet holiday week.
So, why do a trade myself to have something to talk about?
How about that?
There you go.
I like to do what providing your own content.
I like it.
Now, I kind of like to trade and I wanted to, I wanted to watch it.
So I did something similar and there was, there wasn’t anything talked about on Monday, Tuesday with VIX in the 14 and a quarter to 14 40 range or so.
Somebody sold 600 of the goodness gracious, the December 11th, 15 calls for 12 cents.
Or so I think I think I got the strike wrong on that.
But I think, yeah, well, it was the 14 calls.
I apologize.
The 14 calls were sold for 12 cents.
And at the 15 calls were sold for 12 cents.
Someone fired today.
VIX would have had a 14 handle at the time.
This was late Tuesday before AM settlement for these options.
As I mentioned, they’re the 15 calls.
They sold them for 12 cents.
VRO came in at 1368.
So there were a lot of these owned.
I feel like they were kind of trying to salvage the trade yet.
And I hate that I have a typo here that got me all confused on the strike.
It’ll go more smoothly from here.
I promise.
On Wednesday, this was the trade that I kind of liked and I sort of copied.
Somebody, somebody came in Wednesday and it’s going to be our first January weekly option trade.
Woo hoo.
With VIX at 1372, somebody sold 300 of the January 8th 12 calls for four and a quarter.
And they bought the same number of 17 calls for about 25.
They took in a $3 credit.
This thing makes money as long as VIX is under 15.
And if you think volatility is going to be kind of quiet, maybe not the worst trade in the world.
When you’re really thirsty with VIX in the 1370 to 1380 range, somebody came in and did a basically came in and sold a bunch of the January 8th calls.
They sold 800 of them over four different 200 lot trades at an average of a buck 63.
We’ll call it a buck 63.
So couldn’t see if that was teamed up with anything else.
And then finally got a call Condor here, which I find kind of interesting, not really wild about the risk reward, but you know, it is what it is.
They start from the bottom strike.
They bought the, and this is through the end of the year.
This is a December 31st expiring trade.
They bought the 11 and a half calls sold the 12 calls, sort the 14 and a half calls and bought the 15 calls.
That is a cost of 19 cents.
The best case scenario for this trade is a reward of 31 cents.
If VIX is, if the VIX settlement falls between 12 and 14 and a half.
And I do think, I actually think the risk for that one is on the downside because we’re talking about, you know, the day before we’re talking about the day before a holiday.
And it’s very, and if we make it through the end of the year and we’re making through the holidays and nothing has really changed geopolitically, I could see, I could see VIX settlement under 12 on that, you know, on that weekly settlement that morning quite easily.
Quite easily indeed.
Well, are we putting up easy paper today listeners or is a little bit harder?
Let’s go find out.
Like we said, 407,000 contracts.
That is nothing to sneeze at, especially this time of year.
Listeners, the big dog out there is 42, almost 43,000 of the March 70, seven O’s.
And before you get excited, it looks like that’s part of a vertical.
It’s the March 35, 70 vertical going up today, about 40 odd thousand times or around 58 cents.
We have an interesting one.
We thought we’d actually put it out to you folks, a little bit of a flash poll right now.
Are you a buyer or a seller of that vertical at that price?
And so far the early voting, everyone wants to sell it.
You want no part of the March 35, 70 for 58 cents.
So interesting, interesting out there.
Number three today, we have 25,000 of the D 16 calls.
Number four, 21,000 of the DS 15s and rounding out the top five today, 18,000 of the Jan 21s going out to Thursday.
It was the most respectable day of the week out here. 902,000 contracts on the tape of the big dog, the top two really again, its size, longer term vertical season in Vixlan right now.
Listeners, because yesterday the big dog was 100,000 of the Feb 30, 60 verticals going up for about 50, 52 cents looks like paper buy in the thirties and sell in the sixties, a hundred thousand times yesterday.
So 52 cents for that one versus today we had the March 35, 70 for 58 cents.
Either one of those floats your boat listeners.
Apparently I didn’t get the memo, but apparently it is size vertical season here in VIX.
Again, what does that tell us about expectations, perhaps concerns for the future of volatility?
It certainly is intriguing.
Number three, 56,000 of the March 25s yesterday.
Number four, 53,000 of the March 20s and number five yesterday, 43,000 of the DS 20.
So it was all upside all the time there yesterday.
So in spite of our talk, oh, by the way, there was a ratio put spread yesterday as well.
There was the Jan 15, 13 half put spread going up 20,000 by 40,000 times.
Just like for about a 25 cent credit.
So we were just saying not that long ago, how come we don’t see a lot of size ratio put spreads to the downside and VIX, we have seen them in V stocks recently.
Well there’s your Huckleberry listeners, Jan 15, 13 half for about a 25 cent credit out there.
Listen, are you a fan of that?
You’re interested in that?
Actually no, it’s like about 35 cents actually.
So yeah, and intriguing stuff nonetheless.
Let’s move on to Wednesday, 714,000 contracts on the tape.
The big print once again, size upside, not a vertical this time though.
Listen, it’s just actually no, it looks like it was a vertical because this is the ratio we’re used to seeing out here.
First obviously 100,000 of the Feb 40s.
I was thrown off my game by all this straight upside lately, one to one.
We haven’t seen that in a long time and all of a sudden that’s what we’re seeing all week.
But Wednesday getting back to a sense of normalcy, number two, 34,000 of the Jan 40s, number three, 26,000 of the DS 14 puts.
Then number four, so buried away below it is what we’ve come to expect now for VIX upside, which is the ratio.
So 25,000 of the April 20s.
So they did that vertical the 2040 in April one by four.
So do you like that better listeners?
Is that your Huckleberry me 2040?
You are playing with a little fire there.
You could, we could easily, a couple of things go wrong and all of a sudden we are threatening that 20 strike again, if not well through it.
So kind of interesting.
Obviously you expect the four to kick in and make up for that at that point.
But interesting, interesting.
Nonetheless, you like that structure listeners one by four 2040 or you prefer straight verticals.
You prefer straight just buy and VIX upside or do you prefer not to play at all?
Number five yesterday was 25,000 of the DS 13 half puts Tuesday, kind of a light day, 489,000 contracts on the tape.
The big dog 31,000 of the DS 20s followed by number two 26,000 of the Jan 21 is number three 22,000 of the DS 16 puts number four 22,000 as well of the DS 21s and number five on a pretty quiet Tuesday, 20,000 of the DS 35s.
Interesting, interesting strike.
And then Monday also a banger kind of coming out of the gate hot this week, 845,000 contracts on the tape.
Big dog 148,000 of the Jan 22 is number two, 100,000 of the June 42 has number three 50,000 of the Feb 18.
Again, all that was opening listeners.
So size upside prints number four 32,000 of the DS 13 puts and number five 28,000 of the Feb 17 call.
So a lot of paper all over the place, a lot of interesting upsides.
So going back to what we were saying at the top of the show, whether you believe Val is a little too anemic, maybe you believe what Gary was saying earlier that maybe we’re just in that period right now where it doesn’t matter what realized ball is going to do either way.
We’re seeing a whole bunch of Vicks upside lighting up the tape this week.
Mr.
Rock Lobster, you were commenting on this earlier about how you’ve been noticing a lot of upside going up here this week as well.
We’ve got straight up verticals.
We’ve got our old pals, the ratios.
What was catching your eye and what did you perhaps like of all the Vicks upside we saw going up this week?
Well, I have to say, is that that I really liked it?
It’s just that it was happening.
So a lot of Jan, just straight up Jan hitting the upside.
So what let me put up the strikes.
The Jan 20 calls for around a buck, just a lot of very large volume, just straight up like old school call buying.
So the reality is it doesn’t feel like it’s even though V fix is a little higher than where we all think it should be.
Well, it doesn’t feel like a 20 call is hugely expensive for a dollar, but you can buy 1525 call spreads for less than, hard to believe, 1525 call spread is about a buck 50 and we have with a 16 handle on the future.
So you could buy the 16 put and you could buy a 17 call.
Let’s see, it’s 225.
So you could buy 10 point upside strangles for about $1, $1.10.
So short answer is you can buy a strangle and Vicks and 85% of it is intrinsic value where the cash is right now.
So like a 16 put and a 17, let’s call it 1725 call spread for less than 90 cents.
So you look at that and from a risk reward point of view, when I look at this, now I generally don’t buy them now, I will wait as we just slide into expiration next week.
But because like I said, you have heavier or a higher future price because we have that sort of rich future curve, just above our fair value.
These type of strangles become, I think, great trades.
Now, you still got to be mindful to close things when they move.
And for a while, they could sit here for a long time, especially through the holiday.
Just Vicks goes from here down to 1325 and the strangle, like it might not move for a couple of weeks.
Of course, if there’s an event, it moves fast.
So anyway, I think from a pricing point of view, because there’s a little bit of that upside call buying, call spreads are inexpensive.
And with a high future price, your puts are actually cheaper as well.
So I know it’s kind of funny to think about, but anyway, interesting pricing nonetheless, but still a lot of call buying in January.
So you’re saying the hell with all that verticals and upside in ratios, you’d rather just buy your strangle for a little more money and get everything in both directions.
What you’re saying?
Basically, yeah.
Yeah.
Like the risk reward on these things are pretty good.
And every once in a while they pay big.
It’s not everybody likes to trade like that, but you know, I don’t think it’s a bad way to do things.
Our audience is warming, it seems like now to that March vertical and Vicks after most people wanted to sell it to kick off in the early voting, it is now swung the other way, which is kind of what I expected.
Two thirds of you now want to buy that spread 58 cents.
Only a third want to sell it.
It’s one of those spreads.
Listen, are you really going to give up all that upside for 58 cents?
It’s one of those gun to your head.
You probably have to buy it.
You can’t really sell it.
So when we ask these, it’s always kind of a little tongue in cheek, a little fun, but two thirds of you grok into that fact right now.
Let’s go on out to S Vicks land.
Let’s see what’s what’s grok in the world of inverse vol and not a heck of a lot right now.
It’s going to have so ticking down a whopping half a point at the start of the show.
I’m sure if I reracked it now, it’d probably be a little bit different.
Again as fix the the problems be setting the options out here continue to manifest themselves out here.
This thing cannot catch a volume bid to save its life.
I mean, we were threatening 20,000 contracts a day, if not more in this product, not that long ago listeners.
And this thing continues to fall off a cliff.
It’s down another 1300 contracts a day.
Just this week, it is down to 3700 at this point.
It’s going to be back to the very, very early days of aspects pretty soon doing a few hundred contracts a day.
Luckily that level is low enough that they finally hit it today.
We’re at exactly 3700 contracts right now.
So I don’t know.
I don’t know what it’s going to take to get people to trade options on this thing.
And it seems like they have just abandoned it en masse.
Mr.
Rhodes, you were saying last week on the show that you just needed as fix to close at 2999.
The vol gods did not smile upon you.
They closed at 3002.
Talk about just twisting the knife.
We made a fun half joking tweet about that.
But you said that actually you didn’t get a sign.
So you live to find another day, sir.
I didn’t get a sign.
I kind of wish I did.
And I could have bought it back under 30, but I did not.
Actually the, you know, it’s funny where the official clothes that they use for options is based on the primary exchange where it trades.
And I believe that’s the, I think it’s the SIBO exchange for this one.
You would think it would be the SIBO exchange for this one.
So sometimes you’ll see a final print that’s a little bit different.
And I looked at my account on Saturday, I saw like 30, I saw a 30 on Bloomberg.
I saw 2998 on my interactive broker.
So I wonder if that was the actual official close, but either way I did not get them called away and I am not sold.
I am not short any 30 calls this week.
I’m fully in that sucker.
And I do have some, I’m short 30 calls on half of it for next week.
There you go.
So a 30 oh two.
Here we come again.
Yeah.
So, for next week, Mr.
Mr.
Dark and Stormy Shores, sir.
Same question for you.
You guys have been rocking a, an inverse vol newsletter for the last few months.
It’s been a challenging period to be dealing with S Vicks as it’s kind of been doing its own thing and dwindling from a volume perspective.
What’s catching your eye out there on the inverse vol front this week, sir?
I would say yes to exactly what you said.
Everything also means not profitable for the 600 shares I own.
So I came up a little bit on some shares, but we had some prior scalps that weren’t so good.
So what I would say is I’m actually, I’d see a lot of that volume is kind of dried up in the inverse vol.
And the inverse vol products and vol products in general, like you look at the markets and VXX and stuff, still nowhere near what it was before they did all that schism with the bad, with the bad management of the fund.
So I mean, I look at them, I do trade them when I, I think there is a lot more edge in them, but as a regular product, I have to say I trade them less now, except for the S Vicks long we’re holding.
And at some point Vicks will get stay in zone one for a while and they can make money again.
Anyway, for right now, just challenging and illiquid, I would say that’s the easiest thing.
And maybe you Vicks coming up for a split, UBIX.
That’s never going to happen until it gets to 25 cents.
I think they’ve, they’ve laid that out at this point.
They have no apparent inclination to ever want to reverse split this thing again.
I don’t know what’s going on out there.
But strange times a foot out there since we’re talking about UBIX listeners, UBIX at a 315 right now puts it up about a dime on the week, 20,000 contracts on the tape right now.
The ADV is 33,000 also moving in the wrong direction down 4,000.
So obviously when we lay on S Vicks, it’s that time of year, everything has given up some volume in the ball space right now, but S Vicks seems to be singularly cursed by that issue right now.
I mean, UBIX still does enough volume to be tradable.
S Vicks is getting to the point where it is, I think to put it mildly a little bit challenging.
UBIX Y 19 even right now puts it up a whopping quarter of a point from where it was this time last week, 53,000 contracts on the tape.
So all you UBIX Y defense force fans out there, you can celebrate your boys putting up some paper, even though 62,000 is the ADV down quite a bit as well.
That’s down 5,000 on the weekend.
The UBIX Y used to put up a lot more paper, close to 100,000 a day.
So everything in the ball space has kind of come in from the hot and heavy days of August when everything was just putting up paper for days out here listeners.
What will it take to jumpstart S Vicks from an options perspective again?
I don’t know.
This point I do kind of wonder about that.
And Mr.
Dark and Stormy talking about everyone’s favorite good old VX was at a 42 80 when we kicked off the show, giving up nearly a half a point of that now about 42 40 up about six tenths of a point in terms of volume doing about 23,000 contracts right now.
The ADV is 26,000 down 3000.
So again, it’s that time of year.
Everything’s everything’s giving up some paper.
It’s just a question of can you remain active and viable while you’re giving up all that paper and it’s starting to become a question.
But if you look to some of those markets in the weeklies and S Vicks listeners are not exactly light in the world on fire, but you know what is light in the world on fire?
It is the crystal ball listeners.
So let’s get to it.
It’s time to peer into the future and reveal what the volatility gods hold in store.
It’s time to look into the crystal ball.
All right, everyone.
Welcome to the crystal ball, the portion of the show where we attempt to wrestle bravely.
Some might say foolishly with the Val gods for the coming week listeners.
And you know, as we’ve been talking here, we’ve seen Val slowly given up the ghost at the start of the show.
We had Vicks cash at about a 13 and a quarter.
I was to be 14 and a quarter.
I given up about half a point now right down to about a 1376 as we’re coming into the tail end of the show.
Interestingly enough, that puts it pretty much even with V stocks where it closed at 1375.
So all of you have been tweaking your models to get the exact right differential between Vicks and V stocks.
Well, you have failed this week as have a lot of us this week as they are almost exactly equal coming into the tail end of the show on the show.
Last week it was myself.
It was Mr.
Rhodes.
It was the Oracle of New Hampshire and the meatball and the closest actually well on V stocks.
It was me at pretty much a bullseye.
I was at 1378.
So I will put a bullseye note for myself.
So my model working all right.
Listen, maybe not the way I intended, but working all right on the V stock side.
You’ll hear when I get to my Vicks in a second, how well it worked there.
And then on the Vicks side, we had Matt at a 13 half.
So he was closest, obviously not the winner.
We have to be within a 10th of a point for our margin of victory listener.
So we had some people dialing things in and then on the rest of the Vicks, I was the next closest at 1268.
So no joy for me.
Russell’s at 12 and a half and the meatball is at a 1221.
So no joy on the rest of the Vicks side.
On V stocks, we had Russell at a 14 and we had Mr.
Meatball at 1331 and Matt was at a 15 half.
So no joy for the rest of the players on V stocks.
So since our visitor was the closest on Vicks, I will allow Gary in our UREX hot seat, the dubious honor of going first.
Mr.
Gary, what are you feeling for this time next week from a Vicks and or a V stocks perspective, sir?
Yeah, interesting meat coming up, obviously with the Fed market, obviously is thinking 25 is which is most likely, but I think they got an interesting framing to do.
And we’ve got expiry as well.
So there’s a lot of it’s going to be an interesting week, but I am going to go Vicks for this time next week at 12.5.
I’m going to go V stocks a little higher.
I’m going to go 12.7.
All right.
I like it.
I get what you’re putting down there.
And then next, I suppose it would be me.
So I will go in order of Vicks.
So I will go next.
And yeah, it’s kind of hard to argue with the seasonality we’re seeing out there right now.
It just seems to want to pull Vicks sub driving range and keep it there for some time.
A 12 half.
Can we get there?
Listen, I don’t know if I’m feeling quite that much to the downside.
So I’m going to say I’m going to say we’re going to still be in a 13 handle.
I’m going to say we’re at a 1328 this time next week.
All right.
The next closest was Mr.
Dr.
Vicks.
What are you feeling this time next week for Vicks and V stocks?
Oh, where’s the button?
Where’s the button?
The button.
I actually I even wrote these down so I could remember them.
I’m going for 1299 for Vicks and 1399 for V stocks.
Going back to that one point differential, sir, huh?
Yeah.
All right.
And you know what?
I put myself down for the meatball.
I probably shouldn’t do that.
I push myself down for me.
There we go.
And then because we have Mark in the notes and not Andrew.
There we go.
Let’s fix that.
All right.
Now, Mr.
Dark and Stormy Shores, sir, what are you feeling for this time next week for Vicks and or V stocks?
Yeah, I want to go the seasonality, the Fed thing.
I yeah.
Tough one.
This is going to be it’s tough for me.
I honestly think Vicks is going to be higher.
So I’m where we right now.
I’m going to say 1425 and V stocks 25 points less.
So like 14.
Oh, premium, premium to Vicks cash, she says.
And by the way, I’m going I’m going contrary, even though I think it should be lower, but I don’t think we should be here either.
So I just realized I neglected to do a V stock.
So I just wrote in while you were talking 13 double for me on the V stocks.
So that is our market for this week.
By the way, I love our chat.
There were some of them are declaring victory at the beginning of the show for the crystal ball.
So they have learned.
They have learned how to play the game and do that before we go, Mr.
Dark and Stormy Shores, sir.
If folks want more option pit goodies, where should they go?
What should they do?
Yes.
Option pit.com 888 trade 01.
Get ready for my my next flash 10.
That’s probably going to come next year.
This one was so ridiculously successful that people are actually screaming at me to do it again.
So I will crazy returns.
And of course, I do all the trades and option pit myself.
So if you want to trade, learn to trade options with some of you actually trades the options.
Come to option pit.com because that is what we do every day.
Check them out.
Give our best wishes to Mama Lobster, sir.
Thank you, sir.
As we keep on rolling.
Carrie, you get the trooper award for staying up late.
We’ll let you go to bed now.
Before we go, sir, if folks want to check out what is cooking at NNSquared Capital, where should they go?
What should they do?
Yeah, and then squared.com.
And we’re actually having a little webinar on Monday night.
My time Monday afternoon.
Yours.
A couple of things we’re going to point out about the VIX as well.
So if people want to contact me and friendly by I’m happy to add people.
There you go.
Check them out.
NNSquared is the place to go to kick the tires and light the fires.
Look them up if you want to learn more.
And Mr.
Rhodes, where should they go if they want to keep up with your latest volume using, sir?
Well, it’s funny.
Gary mentioned that because I was going to send him a message and ask if I could listen to that webinar.
I saw it on his LinkedIn page, so I will you’ll be hearing from me.
And then as far as what I’m up to, I’m I’m I’m taking a couple of weeks off.
Show me to honestly, I’m taking a couple of weeks off to finish a book that should be out hopefully in May about Mr.
Buffett.
But in the meantime, I’m doing a volatility review for B stocks over the last couple of years at at interactive brokers on behalf of our friends at your ex.
And I think some of your listeners might get some information about that from the your ex folks.
I’m not going to have the actual link today, but I do not have it quite yet.
But January 9th, not at a time that there is anything on the Option Insider Network.
I always make sure that I don’t overlap with their times, which is hard because there’s so many programs, so much stuff.
I get it.
But we appreciate you putting the effort.
Go forth and enjoy your rest.
Sir, you have earned it.
We will speak to you in the new year.
And we’ll look forward to that to that webinar.
Talking all things.
Be stocks on January 9th listeners market down in your calendar while we’re talking V stocks.
You know where to go to learn more about all things.
Be stocks your ex dot com slash V stocks V S T O X X to place to go to learn more.
That’ll get you links to Russell’s previous session he did with them and everything else.
I’m sure eventually this upcoming session will be there as well linked to it’s all sorts of fun.
They’re your ex dot com slash V stocks.
And while we’re plugging things, of course, if you want to help the show directly public dot com slash V V, it is literally the easiest landing page we’ve ever had to promote the folks at public like you folks in the vol space.
They want to lure you to the dark side of their brand spanking new public platform.
The easiest way to see what they’re all about.
Public dot com slash V V.
It supports the show that’s been coming to you for well over a decade.
The listeners and let them know, hey, you’re coming from all views.
And maybe while you’re there, you collect a rebate to train a little vol.
It’s not the worst thing.
Public dot com slash V V is the place to go to kick the tires and light the fires.
We have to get on out of here.
Listeners back again in a little bit with our good buddy, the options guy to break down everything in the world of unusual activity.
If you want to get your hot little hands slash air holes on it, only one place to go.
The options insider dot com slash pro.
Then I’m finally off for the weekend.
I get to join Mr.
Rhodes.
I don’t have quite the extended vacation he does, though, because I’m back again on Monday all the way through to Friday.
Another episode of volatility views.
Stay safe out there, everybody.
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