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Post by Admin/YBB on Dec 21, 2020 19:18:30 GMT -6
#VIX has been mentioned several times for stock market #volatility [sorry, you may have wade through unrelated materials in the tags]. It is based on near-term options pricing for SP500 and indicates estimated ANNUALIZED VOLATILITY for SP500 over the next 30 days; so that is +/- 38% with VIX about at 38 [current]. For DAILY VOLATILITY over next 30 days, divide by 19, so that is +/- 2% daily on average. This is quite a high level of market volatility; but note that during Feb/Mar crash, VIX hit a record 85.47 on 3/18/20. Currently, VIX is in an unusual backwardation [down-sloping] while it is typically in contango [up-sloping]. This means high near-term anxiety in the market. There are also lesser-known VIX-like measures for Nasdaq 100 [VXN], small-cap Russell 2000 [RVX], emerging markets [VXEEM], oil [OVX], gold [GVZ], and several stocks. #personalfinance 11/2/20.
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Post by Admin/YBB on Apr 7, 2021 17:47:29 GMT -6
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Post by Admin/YBB on Aug 29, 2021 12:07:48 GMT -6
SKEW CBOE SKEW range is typically 110-170 and it is reported at end-of-the-day (EOD). It is based on the premise that under NORMAL circumstances, near-term (about 30 days) out of the money (OTM) SP500 puts should be priced comparably as OTM calls. But as hedging demand makes OTM puts more expensive than OTM calls, the SKEW rises; high values are 150+. These data may be converted into the probabilities of more than 2*sigma (or, 3*sigma) declines in the SP500 in the next 30 days. By itself, SKEW has been a WEAK predictor of actual large declines, and it also has given several false signals (i.e. some high SKEW values were uneventful). The information provided is similar to PUT-CALL ratio that uses just the numbers of puts vs calls, but SKEW uses OTM puts and calls pricing data to provide better quantitative information. A curious pattern develops sometimes, high VIX with low/normal SKEW, or vice versa. High VIX with low/normal SKEW indicates that market may be close to a bottom – volatility is high, but investors are no longer paying relatively high prices for puts. Low/normal VIX with high SKEW means that investors are generally bullish and/or complacent but many are also hedging with buying more puts, indicative of cautious bullishness. Rarely seen are high VIX with high SKEW – it means that an ongoing crash isn’t done yet, and low VIX with low SKEW – it means supper bullishness all around. As VIX uses ATM near-term options pricing data for SP500, and SKEW the related OTM data, these indicate what may be going on in the market in the short-term (30 days), and thus are COINCIDENT indicators rather than predictive indicators. CBOE White Paper on SKEW cdn.cboe.com/resources/indices/documents/SKEWwhitepaperjan2011.pdfInvestopedia on SKEW www.investopedia.com/terms/s/skew-index.asp
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Post by Admin/YBB on May 17, 2022 10:56:36 GMT -6
A related recent post at Twitter (it seems that links from Twitter automatically open up here; I have yet to figure out a way to just post the clickable Twitter links; I may just post non-clickable text links in future), YBB Personal Finance @ybb_Finance · 4h 5/17/22 YBB Some indicators work better in combo – eg options-based $VIX & $SKEW Hi VIX, lo/normal SKEW – closer to bottom (recent) Lo/normal VIX, hi SKEW – cautious bullishness Hi VIX, hi SKEW – ongoing crash (rare) Low VIX, low SKEW – supper bullishness (rare) ybbpersonalfinance.proboards.comVIX & SKEW | YBB Personal Finance Blog #VIX has been mentioned several times for stock market #volatility [sorry, you may have wade
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Post by Admin/YBB on May 17, 2022 18:04:17 GMT -6
Bond Volatility ^MOVE at Yahoo FinanceInvestors are familiar with volatility indexes for stocks (VIX, VXN, etc) but what about bonds? Until a few years ago (2020), there were the CBOE bond volatility indexes TYVIX (for 10-yr) and TNVIX (for 30-yr), but they were discontinued due to some fundamental design issues and the lack of wide acceptance by bond traders. They were related to price volatilities of 10-yr and 30-yr Treasuries. Unfortunately, the bond traders care more about bond yields and the volatility of those yields. Eventually, the CBOE discontinued TYVIX and TNVIX and promised replacements but we are still waiting for those. There was a proprietary bond yield volatility index MOVE from ML/BoA (1990s- ) but it was available only to institutional investors with high subscription fees. In 2019, the NYSE/ ICE acquired the MOVE index and has recently made the related daily and historical data available more generally. So, the MOVE data are now available under ^MOVE at Yahoo Finance and MOVE:PSE at FT; unfortunately, it is not available yet at Stockcharts. An excerpt from the ICE purchase of MOVE index (see link below) describes it as follows: "The MOVE Index is a well-recognized measure of U.S. interest rate volatility that tracks the movement in U.S. Treasury yield volatility implied by current prices of one-month over-the-counter options on 2-year, 5-year, 10-year and 30-year Treasuries. In addition, ICE will also acquire other variations of MOVE that track different option expiries, as well as other indices that similarly measure volatility in the U.S. interest rate swap market." So, it is sort of a blended yield volatility of Treasuries of various maturities. But it is available for free (EOD) now. MOVE has had a range of 37-265. Peaks have occurred during credit crisis: Great Financial Crisis (GFC) 264.60 (record), 11/2008; Covid-19 Pandemic high 138.40, 03/2020 & low 36.62 (record), 09/2020; recent peak 131.82, 02/2022; current value 119.46, 5/17/22. So, MOVE is currently elevated but not alarmingly high. Friday closing values for MOVE will be included in Barron's Summaries, Part 1 from this Saturday onwards (5/21/22- ). Yahoo Finance finance.yahoo.com/quote/%5EMOVE?p=%5EMOVEFT markets.ft.com/data/indices/tearsheet/summary?s=MOVE:PSEICE www.theice.com/market-data/indices/real-timeMOVE acquisition by ICE www.finextra.com/pressarticle/79418/ice-acquires-move-index-from-bank-of-america-merrill-lynch
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Post by Admin/YBB on May 24, 2022 11:55:44 GMT -6
VIX Multiplier or Divisor YBB Personal Finance @ybb_Finance 5m (5/24/22 YBB) #VIX originators thought VIX would trade 24/7 (not there yet), so used 365^0.5 = 19.1 multiplier or divisor for daily-annual conversions. Easy to remember 19. So, VIX of 30 means daily #volatility of 1.6%. BTW, (multiplier or divisor) 16 works for almost anything else that trades during market hours. Twitter LINKMore related Tweets on this issueAAII J LINK1 AAII J LINK2YBB Personal Finance @ybb_Finance (6/1/22 YBB) Replying to @charlesraaii 1/2. #AAIIJournal, 06/2022, Re article on #VIX. VIX was intended to trade 24/7, so it uses 365^0.5 = 19.1 conversion factor for daily-annual conversions. Remember 19 for easy calculations. So, VIX of 20 means daily volatility of 1.05% (not 1.25%). YBB Personal Finance @ybb_Finance (6/1/22 YBB) 14m Replying to @ybb_Finance and @charlesraaii 2/2. On the other hand, 52 x 5 = 260 days, less 9-10 holidays, lead to easy to remember approx conversion factor16 for almost any measure related to things that trade during market hrs & have square-root in definition (#StandardDeviation, etc). And more, Twitter 9/28/22 and Twitter2 9/28/22YBB Personal Finance @ybb_Finance (9/28/22) Replying to @allstarcharts #VIX daily-annual conversion is based on full year (365 days), not just the market-days. So, the proper conversion factor is around 19 (sqrt 365 = 19.1), not 16.
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Post by Admin/YBB on Jun 1, 2022 6:35:30 GMT -6
Twitter LINK on oil $OVX. Liz Ann Sonders @lizannsonders 1h (6/1/22) For now, extreme intraday volatility for Brent Crude has calmed down YBB Personal Finance @ybb_Finance 43m (6/1/22 YBB) Related #CrudeOil $OVX based on $USO options (#WTI) shows a similar pattern. Change timeframe as necessary (default 1 yr). stockcharts.com $OVX - Volatility Index - CBOE Crude Oil SharpChart from StockCharts.com
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Post by Admin/YBB on Sept 29, 2022 7:30:52 GMT -6
VIX PrimerThere is lot of confusion about VIX factor for DAILY-ANNUAL conversion. CALENDAR-year (365d; not 250d-260d trading-year) is used for options. For precision, minutes are used (1d = 1,440m, 1y = 525,600m). This VIX Primer is prepared to address this. ybbpersonalfinance.proboards.com/thread/17/vix-skew-move?page=1&scrollTo=641FEAR GAUGE VIX is based on near-term & next-term options for SP500 to estimate ANNUALIZED VOLATILITY for SP500 over the next 30 days. There are also VIX-like measures for Nasdaq 100 (VXN), small-cap Russell 2000 (RVX), emerging markets (VXEEM), oil (OVX), gold (GVZ) & several stocks. The CBOE publishes a current CBOE VIX Methodology – MATHEMATICS document. There are 2 formulas. The first on pg 5 calculates VIX for near-term and next-term options. The second on pg 8 calculates 30-day weighted-average of near-term and next-term VIX, and annualizes by using the factor M365/M30 where M are minutes for 365 and 30 days, respectively (1d = 1,440m, 1y = 525,600m). Note that CALENDAR-year (365d; not 250d-260d trading-year) is used for options & for precision, MINUTES are used. cdn.cboe.com/api/global/us_indices/governance/Cboe_Volatility_Index_Mathematics_Methodology.pdfThe CBOE also publishes a current CBOE VIX Methodology – EXAMPLE document. cdn.cboe.com/api/global/us_indices/governance/Volatility_Index_Methodology_Cboe_Volatility_Index.pdfSo, the correct conversion factor for DAILY-ANNUAL conversion for options-based VIX is 365^0.5 = 19.1, or 19, & not 252^0.5 = 15.87, or 16. The latter (16) is used for standard deviations for stocks & bonds where trading days (52 x 5 – holidays) are used. References en.wikipedia.org/wiki/VIXen.wikipedia.org/wiki/Volatility_(finance)en.wikipedia.org/wiki/Black%E2%80%93Scholes_model
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Post by Admin/YBB on Dec 12, 2022 18:01:56 GMT -6
Some Historical Data for VIX for 1990-2022 & 2022Unusual movements in the volatility on 12/12/22 (Monday) generated some interesting data on Twitter1, Twitter2. What was unusual about the day was that on a strong market day, the stock volatilities VIX, VXN, RVX were up; the bond volatility MOVE up; while the EM volatility VXEEM down; the gold volatility GVZ down; the oil volatility OVX down. It is a week with CPI release (Tuesday), FOMC meeting (Tuesday-Wednesday) and there are rumors of a leak of some sort. The chart below shows that, historically, VIX down on SP500 down days is MORE common than VIX up on up days (like 12/12/22; also looks an outlier). Both of these are unusual as VIX and SP500 typically move in the OPPOSITE directions. The table below shows large positive moves in VIX when the SP500 was also up from 1990-2022. Chart image pbs.twimg.com/media/Fjz57_uWIAAxwBh?format=png&name=smallTable image pbs.twimg.com/media/Fjz1bJFXoAEP0rb?format=png&name=small
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Post by Admin/YBB on Jan 14, 2023 17:50:23 GMT -6
VIX Based Portfolio StrategiesStock market is a "market" and you will find investors acting differently based on the same data. This is how "markets" are made. If everyone acted the same way, there will be no "market". VIX is called the Fear-Gauge. For simple calculations, let us assume that VIX is 20. Then, it means that the expected daily volatility is +/- (20/19)% or +/- 1.05% most of the time (and a multiple of that some of the time). An institution running $millions or $billions looks at $amount of daily changes and says, vow, that is too much fluctuation (1.05% of $100 million is $1.05 million, 1.05% of $100 billion is $1.05 billion), and reduces the portfolio exposure to SP500. So, as VIX goes up, many big institutions tend to become fearful and scale the exposure down; reverse when VIX goes down. There is another name for this - portfolio insurance strategy. A small investors dealing with, say, $1,000 holding looks at a daily change of about $10.50 and thinks, OK, that isn't a big deal (that is the price of not even 2 Starbucks lattes). So, when the market moves down, that small investor may become more venturesome and think that he can buy more at a better price. Such a small investor may be called (derogatorily by some) a BTD (buy-the-dip) buyer or simply a dip-buyer; but if a large investor, he/she may be called a contrarian investor. So, this type of investor buys more as VIX goes up; reverse when VIX goes down. I used VIX of 20 for a reason. For both types of investors, VIX >20 is high, and VIX < 20 low. But they act in opposite ways. The first type of investor is focused on absolute changes in portfolio values, the second type on % changes. So, to answer your question in the OP, tell us which of these types of investor you are, and you will know the answer yourself. Edit/Add, 1/15/23: From the charts, VIX looks more like a coincident indicator for SP500 rather than a predictive indicator. This is understandable as options markets react to the markets very quickly. Now that VIX for SP500 is options-based, the concept can be applied to other things with options. So, there are corresponding "VIX" for Nasdaq 100 (VXN), small-cap Russell 2000 (RVX), emerging markets (VXEEM), oil (OVX), gold (GVZ), bond market (MOVE; normalized), and can also be for stocks with options. So, it isn't necessary to rely on SP500 VIX for everything. NOTE. These were posted on Fidelity Investor Community on 1/14/23, 1/15/23 in a thread, "VIX Index as Predictor of SP500". Edit/Add2, 1/16/23. Twitter Post on VIX. YBB Personal Finance @ybb_Finance (1/16/23 YBB) Replying to @mr_Derivatives #VIX was significantly changed in 2003. The old #VXO still existed until 2021. While crash level of VIX is between 40+ to 80+, VIX > 20 is still high - that means +/- 1.05% daily volatility. VIX was elevated in 2022 but didn't reach crash level (max 39). cboe.com/tradable_products/vix/vix_historical_data/
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Post by Admin/YBB on Feb 11, 2023 18:08:53 GMT -6
Options 0DTE, 1DTE, Etc0DTE (0 days to expiration, or same-day expirations) are the shortest-term OPTIONS that are causing a speculative frenzy; there are 1DTE,..., NDTE, etc too. These are very cheap and offer highly leveraged bets but are also risky. This dash-to-trash rally (in depressed, low-quality and meme stocks) has been fueled in part by the 0DTEs. There is nothing new here as all options near expiry will go through these phases. But no-commission trading makes this trading possible for retail (in the old days, $5-10 commissions per options contract (100 shares) didn't make this worthwhile except for dealers). These options' high volumes aren’t reflected in the fear gauge VIX (that is options-based) that uses options with 30 +/- 7 days left to maturity. In addition, there are already VIX for 9 days (VIX9D), 3 mo (VIX3M), 6 mo (VIX6M), 1 yr (VIX1Y). Just as the regular VIX (for 30 days) uses SP500 options that bracket 30 days +/- 7 days, VIX9D brackets 9 days options (variable days +/-), and similarly for others. Note that VIX9D and VIX look very similar although the values of VIX9D are a bit higher than those for VIX. But even VIX9D isn't capturing any activity related to 0DTE. Yahoo Finance symbols (with very limited History): 9 days (^VIX9D), 3 mo (^VIX3M), 6 mo (^VIX6M), 1 yr (^VIX1Y); regular 30 days ^VIX StockCharts symbols (with more History): 9 days ($VXST), 3 months ($VXV), 6 months ($VXMT), none for 1 year; regular 30 days $VIX VIX9D/VXST Quotes and Charts CBOE www.cboe.com/us/indices/dashboard/vix9d/Yahoo Finance finance.yahoo.com/quote/^VIX9D?p=^VIX9D&.tsrc=fin-srchStockCharts, VXST & VIX stockcharts.com/h-sc/ui?s=%24VXST&p=D&yr=1&mn=0&dy=0&id=p20709537255StockCharts, VXST vs VIX stockcharts.com/h-perf/ui?s=$VXST&compare=$VIX&id=p42404218433Investopedia www.investopedia.com/zero-days-to-expiration-0dte-options-and-how-do-they-work-6753832www.sixfigureinvesting.com/2014/02/vxst-index-futures-options-quotes-and-expiration-dates/ybbpersonalfinance.proboards.com/thread/393/barron-february-2023-market-weekwww.barrons.com/articles/zero-options-fuel-frenzy-wall-street-casino-meme-stocks-51675445766www.mutualfundobserver.com/discuss/discussion/60647/0dtewww.advisorperspectives.com/articles/2023/02/01/how-0dte-options-will-cause-the-next-black-monday0dte.com/
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Post by Admin/YBB on Mar 16, 2023 6:07:49 GMT -6
Bond volatility MOVE at 198.71 is now the highest since the GFC (2008-09). It is a blend of volatilities of Treasuries of various maturities. Bond market has been whipsawed in the recent days by Powell's testimony last week (tough) and a global banking crisis led by the US (not Europe) - 3 US bank failures* in 4 days, needing a bank rescue plan (QE for banking?). May be, call it Quantitative-Lending or QL - lending at PAR for underwater securities. *SVB Bank failure is now #2 biggest in the US history, Signature Bank #3. Failed crypto-friendly Silvergate Bank is now just a footnote. finance.yahoo.com/quote/^MOVE?p=^MOVE
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Post by Admin/YBB on Apr 22, 2023 20:36:21 GMT -6
New CBOE VIX1D IndexThe CBOE will use the current methodology for a new VIX1D index that would capture both 0DTE and 1DTE options. As these are business days, VIX1D could be, say, 2DTE (for weekends) or 3DTE (for long weekends) with calendar days. Other VIX indexes have distortions due to weekends and holidays, and those would be even more noticeable with VIX1D. The CBOE may introduce VIX1D futures later. CBOE VIX1D www.cboe.com/us/indices/dashboard/VIX1D/Twitter LINK Twitter LINK2More Details by Vance Harwood www.sixfigureinvesting.com/2023/04/how-does-the-cboes-vix1d-work/Edit/Add, 4/23/23. Twitter LINK3YBB Personal Finance @ybb_Finance (4/23/23 YBB) Replying to @6_Figure_Invest Treasury #MOVE is a blend. But it is normalized, so it loses association with % moves in Treasuries. May be there could be a weighted-blend #VIXW using #VIX1D, #VIX9D, #VIX (really #VIX30D), etc. Edit/Add, 4/24/23. Yahoo Finance recognizes ^VIX1D, finance.yahoo.com/quote/%5EVIX1D?p=^VIX1D&.tsrc=fin-srchBarchart recognized $VIXD, www.barchart.com/stocks/quotes/$VIXD/overviewStockCharts is still pending. Backtest for 1 year, Twitter LINK4. pbs.twimg.com/media/FugTIqUWIAkz2WS?format=jpg&name=900x900
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Post by Admin/YBB on May 1, 2023 13:46:30 GMT -6
VOLATILITY DECAY There are several VIXs now and those use some target dates and few days/hours around those to establish short-term volatility, and then annualize those. Most common is ^VIX (or ^VIX30D) that uses options expiring in 30 days +/- 7 days. Most recent was ^VIX1D because none of the earlier VIXs were capturing information about 0DTE (same-day) and 1DTE (next-day) options. However, as the option expiry dates approach, there are well-known decays in the options premiums, but also decays in the options-based volatility. Here is a snapshot of various VIXs on 5/1/23: ^VIX1D 10.54 ^VIX9D 16.47 ^VIX 16.23 ^VIX6M 22.68 ^VIX1Y 24.17 Notice how the decays are gradual from 1Y to 6M (-6.16%), large from 6M to 30D (-28.44%), and dramatic from 30D to 1D (-36.00%). Until ^VIX1D came along, and had some history (including backtesting results), that sharp decay in volatility would have been difficult to guess. These quotes are in Yahoo Finance style; StockCharts use symbols such as $VIX and some other characters. These data look similar to the VIX future-curve but that is a different concept – VIX futures with settlements farther away. Also, the futures trade at premiums from the underlying indexes. But it would be difficult to project/extrapolate to 1D from these data. On 5/1/13, the VIX future-curve sample points were (months remaining to expiry): 05/19/23 15.50 (0.5M) 06/16/23 17.39 (1.5M) 07/21/23 19.10 (2.5M) 08/18/23 20.48 (3.5M) 10/20/23 22.34 (5.5M) 11/27/23 22.91 (6.5 M) www.cboe.com/tradable_products/vix/term_structure/Edit/Add, 5/2/23. A mini market selloff (SP500 -1.16%, KRE -6.27%, ^MOVE +7.31%) provided the opportunity to see how these VIXs reacted: ^VIX1D 19.82 +97.02%, ^VIX9D 18.61 +15.81%, ^VIX 17.96 +11.69%, ^VIX6M 23.47 +3.71%, ^VIX1Y 24.72 +3.17%. Only ^VIX1D showed a huge change; its "decay" also disappeared. This was the day AFTER J P Morgan Chase/JPM took over First Republic Bank/FRC and there was realization that the regional banking crisis may not be over, and the BEFORE the FOMC on 5/3/23 when the Fed is expected to hike the fed fund rate by +25 bps, but may offer a modified guidance. Live Yahoo Finance LINKEdit/Add2, 5/10/23. A pattern noted is that VIX1D starts out the trading day at lower values as it has mostly 0DTE (same-day) options. But as the trading day ends, it has mostly 1DTE options (next-day). This is clearly seen in 5-day charts at Yahoo Finance (click on 5D in the link). However, the news/events of the day may affect this expected pattern. finance.yahoo.com/quote/%5EVIX1D?p=%5EVIX1D
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Post by Admin/YBB on Mar 4, 2024 7:19:16 GMT -6
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