Volatility Views 145: Debating Earnings Skew and Corporate Racism

02/09/15 • 65 min

Volatility Views

Volatility Review: A look at the week in vol:

VIX Cash: High: 22.81, Low: 16.67
S&P: 30-day IV: 15, 30-day HVOL: 16, Skew Index: 127.54
VVIX: Thursday close: 98.56
VIX Options: Total 4.80m (2.86m Calls, 1.95m Puts)
Market now loving CBOE numbers, stock off 5.5% - earnings were up 7.6%, but missed expectations. Extended VIX Options trading hours start March 2.
VXST: Another week of anemic volume dispute significant underlying movement.
RVX: Still no appreciable volume.
OIL: Another crazy week for oil - rallies over 20%, then clipped, the rallied more again. Currently hovering above the $50 strike again.

Volatility Voicemail: Listener questions and comments

Reply from Ernitin14 - @OptionsInsider love Vol Views show. Here's my counterargument on remarks on skew shape. If everybody is hedging their short bet, vol squeeze is very likely which is exactly what happened in GOOG post earnings. Yes ATM call spread were the best plays, in case it was a win - win situation. Blow out numbers - upside explosion, so-so numbers- covering their shorts. What I am missing?
Question from Uncle Ben - Liked the discussion on risk premium from the last episode. This is a topic I have always struggled with. It seems like you are chasing your tail either way. If you compare straightforward 30-day implied vol vs. historic vol, then you are comparing an indicator that is really 30 days forward with an indicator that is nearly 30 days lagging. It does not make much sense. If you attempt to extrapolate realized vol forward, you run into the same errors that plague implied volatility. There are millions of dollars spent on volatility forecasting models that cannot get it right, so what chance do I really have with my own little algorithm? Is this all a fool’s errand?
Comment from Alvo - Hey guys - just a note that 30-day historical vol actually measures about 20 trading sessions, with 30-day implied vol foes out a full month. Different size sets = problems.

Crystal Ball: Andrew and Jared prognosticate wildly.

Volatility Views 145: Debating Earnings Skew and Corporate Racism

Volatility Review: A look at the week in vol:

VIX Cash: High: 22.81, Low: 16.67
S&P: 30-day IV: 15, 30-day HVOL: 16, Skew Index: 127.54
VVIX: Thursday close: 98.56
VIX Options: Total 4.80m (2.86m Calls, 1.95m Puts)
Market now loving CBOE numbers, stock off 5.5% - earnings were up 7.6%, but missed expectations. Extended VIX Options trading hours start March 2.
VXST: Another week of anemic volume dispute significant underlying movement.
RVX: Still no appreciable volume.
OIL: Another crazy week for oil - rallies over 20%, then clipped, the rallied more again. Currently hovering above the $50 strike again.

Volatility Voicemail: Listener questions and comments

Reply from Ernitin14 - @OptionsInsider love Vol Views show. Here's my counterargument on remarks on skew shape. If everybody is hedging their short bet, vol squeeze is very likely which is exactly what happened in GOOG post earnings. Yes ATM call spread were the best plays, in case it was a win - win situation. Blow out numbers - upside explosion, so-so numbers- covering their shorts. What I am missing?
Question from Uncle Ben - Liked the discussion on risk premium from the last episode. This is a topic I have always struggled with. It seems like you are chasing your tail either way. If you compare straightforward 30-day implied vol vs. historic vol, then you are comparing an indicator that is really 30 days forward with an indicator that is nearly 30 days lagging. It does not make much sense. If you attempt to extrapolate realized vol forward, you run into the same errors that plague implied volatility. There are millions of dollars spent on volatility forecasting models that cannot get it right, so what chance do I really have with my own little algorithm? Is this all a fool’s errand?
Comment from Alvo - Hey guys - just a note that 30-day historical vol actually measures about 20 trading sessions, with 30-day implied vol foes out a full month. Different size sets = problems.

Crystal Ball: Andrew and Jared prognosticate wildly.

Previous Episode

Volatility Views 144: Talking Earnings Volatility

Volatility Review: A look in the week from a volatility perspective

VIX Cash: High: 21.55, Low: 15.52
S&P: 30-day IV: 18, 30-day HVOL: 17, Skew Index: 130.44. Goldman says nap time for put sellers.
VVIX: Thurs close: 100.70, Week range: 91.85-109.99
VIX Options: Total 4.29m (2.97m Calls, 1.32m Puts)
VXST: Another week of anemic volume despite significant underlying movement.
RVX: Still no appreciable volume.
OIL: Another crazy week for oil. Saudi prince reiterates that "we will never see $100 oil again." OPEC Chief says this may be the bottom for oil.

Volatility Voicemail: Listener questions and comments

Question from NINC - Hey Volatility Views guys. I know you have discussed the topic of earnings studies in the past, particularly as it relates to earnings straddles. You said there was not much research on the topic. Has the situation changed since that conversation? Has there been any new research on the topic? I know you discussed the possibility of doing such a study for this program? What is the status of that study? Please let me know when you release it as I would be very interested in the results. Thank you for this network. I am a regular listener of volatility views, options boot camp and the news rundown programs.
Question from Andrew S - If you had to lean long or short going into every earnings cycle which way would you go? Me - I am tempted short but I am terrified about the blowout events.
Question from Nitin Gulati - @OptionsInsider Funny how $GOOG moved today, apparently skew was bid up all day yesterday, so not a surprise.

Crystal Ball: Mark and Jared prognosticate wildly.

Next Episode

Volatility Views 146: Betting on Fed Volatility Volatility Review: A look back in the week from a volatility perspective • VIX Cash: High - 19.28, low - 15.26 • S&P: 30-Day Imp. Vol - 13, 30-Day Hist. Vol - 16. Skew Index - 129.94 • VVIX: Thursday

Volatility Views 146: Betting on Fed Volatility

Volatility Review: A look back in the week from a volatility perspective

VIX Cash: High - 19.28, low - 15.26
S&P: 30-Day Imp. Vol - 13, 30-Day Hist. Vol - 16. Skew Index - 129.94
VVIX: Thursday Close - 93.24
VIX Options: 700K contracts on Feb 12, for a strong up day for the market. Total 5.36m (3.28M calls, 2.08M puts).
Extended VIX Options trading hours start March 2.
Upcoming launch of RealVol SPY Options on BOX - good news for our former co-hosts.
VXST: Current open interest: 3 contracts.
RVX: Current open interest: 58 contracts.
International Volatility Review: RVI - Russian Volatility Index
OIL: WTI March futures are back above $50, after dipping below it again. OVX still hovering near $60, 6-month chart of OVX is pretty impressive.

Volatility Voicemail: Listener questions and comments

Follow-up from Uncle Ben - Thanks for answering my question last week. Your sympathy for my plight as the “lone market participant” is appreciated. Sorry I set off the racism detector with my handle. I did not mean to derail the program. It just happens to be my name (although I do like the rice).
Question from Tim Biggs - Any data on that theta free approach to earnings? What percentage of decay occurs prior to the event vs. post-event and how does that compare to underlying movement during the period?
Question from George - This may seem like a silly question but does anyone go out and look at old VIX cash data from 30 days ago and compare that to current realized? Is that not what VIX cash is attempting to predict? Is that disseminated anywhere as a number or index? Something along the lines of a VIX Accuracy Index?
The Wager:
Comment from Tom Statton - I think both co-hosts should buy Mark a steak regardless of the outcome for featuring them on this fantastic program. Well done Mark. I would buy you one as well if you ever make it to Alberta.
Comment from Mark A - No way Fed raises this year. When he loses, I think Jared should fly to Chicago and host a cocktail party for all Volatility Views listeners. I would happily allow him to buy me some tasty beverages.
Comment from SylvanElph - Regarding the Fed Bet - It is a radio program so the co-hosts cannot wear embarrassing outfits. Maybe buy the other a pizza of their choice? So Jared would have to buy Mark (and Mark) a nice Chicago deep dish and Mark would have to buy Jared a tasty NYC thin crust. Or New Haven style. Whatever his preference.
Comment from Jeremy Stevens - I think the Fed will have to adjust their rates before the close of 2015. They are too terrified of inflation and stagflation to sit on their hands. Not sure why a blip in CHF in early 2015 would set the tone for Fed policy at the end of 2015? Maybe Mark can elaborate? As for the wager - How about the loser gives away 5 free subscriptions to his services to VV listeners? So Jared can give away some BGC Research and Mark can offer his Option Pit subscriptions.

Crystal Ball: Mark and Mark prognosticate wildly.