In 2010 I set out to prove that I understood the indexes that underlie the volatility Exchange Traded Products (ETPs). I developed a spreadsheet that uses the CBOE’s historical VIX Futures data to produce the short term (1 to 2 month) and medium term (4th through 7th month) rolling volatility indexes. The heart of these indexes is the daily roll of VIX futures contracts. At …
There are lots of valid ways to look at the market. Obviously, price is important, but a number alone (e.g., 1487.85—the Feb 25, 2013, S&P 500 close) doesn’t mean much. Price related metrics like percentage changes and support/resistance levels add value, but adding time as a factor enables some really interesting measures like moving averages and momentum trackers. My favorite time-related metric is term structure—how the …
Exchange Traded Funds (ETFs) look a lot like stocks because they trade during the day, can be sold short, and have options and they look a lot like mutual funds because they aren’t tied to a single company. The items are important things to know. There’s more to ETF cost than the annual fee If you aren’t planning to just buy and hold your ETF investment …
A while back I developed a consolidated spreadsheet to organize historic VIX futures data from the CBOE into a single spreadsheet. Using this spreadsheet I calculate the short (SPVXSTR) and medium term (SPVXMTR) rolling indexes that underlie the various volatility Exchange Traded Products (ETP) like VXX, UVXY, XIV, and ZIV The image below shows a small sample comparing my calculations (M1-M2 Short Term Rolling Index) with the official …
One of the options strategies Jeffery Augen discusses in his excellent book, “The Volatility Edge in Options Trading” takes advantage of the typical ramp up in option’s implied volatility (IV) before an earnings announcements. Upcoming announcements create uncertainty, and the option market prices that in by increasing the premiums—which is reflected in the IV of the options. This ramp up in IV can be surprisingly …
