The chart above plots the historical volatility of the closing prices of the S&P 500 (SPX) over the past 10, 30, 60, and 90 days. The 10 day line probably corresponds most closely to what most traders feel about how the market has acted. Notice that the 90 day reading has just drifted at around 60% since early December – it will take some time for the extreme moves from last year to be “worked off” as the rolling window…
Wednesday, November 26, 2008
The following chart displays the 10, 30, 60, and 90 day historical volatility of SPX since August 2008 (click to embiggen). The slowest-moving reading above, the 90 day, has just ticked down from the plateau formed earlier this week around 58%, and the 60 day historical volatility has leveled off as well. That’s actually not very significant in and of itself: these are moving windows and at a certain point even the longer-dated lookbacks will only include days since “everything changed”…
Tuesday, October 14, 2008
Comments Off
We mentioned yesterday evening in a note to subscribers that in the past, high volatility environments have been the best times to sell option spreads. Rising volatility alone isn’t a sufficient signal – as anyone who was short volatility during the past few weeks can attest. But once high-flying implied volatility readings turn the corner or flatten out, that’s often a good time to sell premium at those elevated levels. From a directional perspective, there are signs that, two days after the…
Tuesday, October 7, 2008
Because implied volatility is forward-looking, it tends to lead backward-looking historical (or realized) volatility readings. This relationship stands to reason: options prices can and do respond in real time to new information, while any historical measurement – even a short-term one – will by definition lag as day-to-day changes are gradually incorporated into the period under review. The chart above (click to enlarge) displays the 30 day historical volatility (HV; the dotted line) and the nearer-months average implied volatility (IV; the solid…
Wednesday, February 11, 2009
1 Comment