Sep 12, 2016
Volatility Review: A look back at the week from a volatility perspective
- VIX Cash: Back above 12; 30-day HV - 5; 30-day IV - 11
- VVIX: 85
Russell's Weekly Rundown:
- Interesting trade in the weekly VIX options.
- VIX Options: Truncated trading week
- Crude Oil: Mixed signals this week. WSJ: Crude stock drop sparks rally.
Volatility Voicemail: Listener questions and comments
- Question from Joshua Shealy: Thanks so much for all that you guys do! Sorry if this is a novice question. I know that Delta is not literally the % chance of expiring in the money, but more so the rate of change for a $1 movement in the underlying. I noticed today (8/26/16) looking at VIX Dec Calls that the strike closest to .5 Delta is the 20 strike, a long way from ATM. I usually associate near .50 Delta with being near ATM. Is this just a nuance of VIX, or am I missing something bigger? Thanks!
- Question from Dr. Larry: Hi Mark. Andrew mentioned buying
stocks and buying covered long term puts when IV is so low. I
wonder your opinion on my favorite low Vol strategy: Buy ETFs,
preferably non-correlated underlyings and some with dividends.
Example: DIA, SPY, TLT, GLD, multiple sectors, foreign markets… I
then buy the longest dating LEAPS available with strikes 5% under
current price of underlying. I then sell covered calls every 30-60
days that are one to two strikes or 3-5% or more, out of the money.
Management:
ETF stays same, roll short calls out.
ETF goes up a little, roll short calls up and out.
ETF goes up a lot, called away, re-establish covered call, roll leap up.
ETF goes down a little, roll short calls same or down strike assuming still above leap strike.
ETF goes down a lot, take profit on leap, re-establish lower strike leap, roll short call down but above leap strike
1-year later, roll Long leaps out one year if IV still low. Close positions if IV is high and wait for lower iv again.
I add to positions monthly by buying diagonals, long LEAP, short at the money call and either get assigned on short call, or roll short calls. If and when IV goes up my long puts make more or lose less, and I can sell more call premium which covers the entire price of my long puts after a few rolls. Sorry for long email. I hope you can discuss on the air. While I listen to almost all shows I occasionally miss due to work obligations. Can you alert me of when it airs if you discuss this? Thanks. Dr. Larry in NYC - PS: tell Sebastian he never returned my call.
- Question from Joneil: Heard someone talking about the VVIX/VIX ratio. Did not make much sense to me. Is that something you guys track?
Crystal Ball: Wild and reckless prognostication
Last week:
- Mark L. - 11.75
- Mark S. - 12.50
- Russell - 12.99
This week:
- Mark L. - 14.5
- Mark S. - 13
- Russell - 17