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Appearance on Abnormal Returns TV
I really enjoyed chatting with Tadas Viskanta of Abnormal Returns last week. In the video below we discuss VIX whipsaws, the Japan VIX, the volatility risk premium, and the ubiquity of black swan...
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The Cost of Hedging Equity Exposure Is Higher Than It Looks
BofA interest rate strategists Ralph Axel and Ruslan Bikbov suggest that now would be a good time to buy tail risk hedges. (hat tip Joe Weisenthal) 6-month options on 10-year swap futures are as...
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Is the threat of airstrikes against Iran driving oil options prices higher?
Probably. First, some context. Here’s the one-month volatility risk premium in USO options since 2007. Think of this as an estimate of how richly or cheaply priced options on crude oil are, relative to...
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Volatility Analysis: The Next Step in Trading
Every investment is an instance of a more general schema: Because of q, I believe that p, so I will risk some money to make a profit if p is true. The proposition p could be about anything: it could be...
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Something Strange is Happening to Treasury Bond Options
It looks like investors are willing to pay more for options exposure to Treasury bonds than they ever have before. It is a well-known fact that, across many different markets and consistently over...
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Preparing for the Fiscal Cliff Debate
The approaching U.S. fiscal cliff has been on the radar of every strategist and portfolio manager since the compromise was reached in 2011. If policymakers are not able to amend the current mix of...
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Why Taleb is Wrong About Markets and Uncertainty
Once you cut through the layers of purple prose and elective neologism, Nassim Nicholas Taleb’s central thesis is not hard to understand: people often know less than they think that they do, and some...
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The market is as nervous as ever about austerity fetishism
In a recent note, Goldman Sachs economist Alec Phillips wonders whether the market is becoming less sensitive to political brinksmanship: (via Business Insider) The chart shows the level of VIX in the...
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Q4 2012 Condor Options Performance Review
The Condor Options newsletter portfolio returned 21% in 2012, versus 17% for the S&P 500. The strategy also beat the S&P 500 in the final quarter of the year, giving back 1.1% versus the SPX...
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A Long Term Look at the S&P 500 Volatility Risk Premium
Some clients here and readers on Twitter asked for a long-term look at the relationship between the historical volatility of the S&P 500 and the implied volatility of SPX options. The chart below...
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