Volatility Tracker for the week of February 8, 2010
Except for a brief interlude in mid-November, equity index options haven’t been this fairly valued in about a year, meaning that realized volatility has more closely matched the volatility implied by options prices. [5,6]
The February VIX futures contract closed above the March price on Friday -something that hasn’t happened on a weekly basis in quite some time. [7] It’s important not to read too much into this, since the front month contract…
Volatility Tracker for the week of February 1, 2010
This week saw realized volatility rise to meet last week’s spike in implied levels, although as I mentioned those spot implied levels weren’t easily sustainable. [2] I’m not the world’s greatest proponent of technical analysis, but the price charts for equities and oil deserve a look. Failure to revert toward recent averages would be further confirmation of the ill health of this market. [4,15]
With a less than one-point range over the past…
Volatility Tracker for the Week of January 10, 2010
The continuing rally in equities has resulted in some remarkable volatility readings. 21-day realized volatility in the S&P 500 closed below 10% on Friday [5], and the spread between 21-day realized volatility and spot implied volatility 30 (calendar) days ago is wider than at any time in 2009.[6] While option implied volatility regularly tends to run higher than the realized volatility in the underlying, current readings are extreme. Since equity volatility is…
Volatility Tracker for the week of December 7, 2009
The jump in volatility indexes noted in our previous report was met with a similar decline last week.[2] The VIX could easily make a new 52-week low before 2009 is through. Gold implied volatility advanced sharply on Friday’s price decline [3], with GVZ closing just shy of my 30% short-term target. The shift in the volatility skew in gold deserves attention: if traders continue to pay higher premiums for downside protection this…
Volatility Tracker for the week of November 23, 2009
News-making price changes in gold [11] have not been accompanied by any particularly noteworthy behavior in the options market. While it would be wrong to suggest that options in any way “anticipated” the gold rally, it is also fair to say that price action in the underlying has been roughly in line with the expectations given by option prices. Notice that the CBOE’s VIX-style gold volatility index (GVZ) has drifted between 20…
Monday, February 8, 2010
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