Friday, July 24, 2009

Excellent New VIX Video at masteroptions.com

As a discretionary trader, I sometimes like to act on my gut before I get the proper confirmation signal to enter or exit a position. The bottom line is that I don’t mind being early and I don’t mind being wrong, as long as the economics of my gut is positive on balance.

Two weeks ago, I took that same gut feel approach with a new blog from a blogger I was completely unfamiliar with. In fact, in New Options Blog: masteroptions.com, I had the nerve to call Dean Mouscher’s blog “a must read” after only two posts. Well, bloggers come and go, but if masteroptions.com were a stock, I think my IPO price would have at least doubled or tripled by now, based on the number of readers who thanked me for the recommendation.

The latest from masteroptions.com is The VIX – What You Need to Know and includes a new 16-minute video that details some of the essentials of the VIX, with an emphasis on VIX futures. Between Dean’s video and My Ten Things Everyone Should Know About the VIX, someone who is new to the VIX can get up to speed very quickly.

Two quick comments on Dean’s video:

  • VIX futures were introduced in March 2004; VIX options were not introduced until February 2006 (see Overview of the U.S. Volatility Indices for more details)

  • Representatives from at least three different brokerages have told me that the SEC/CFTC regulatory split is responsible for quotes for VIX options erroneously using the cash VIX instead of VIX futures as the underlying for calculating VIX implied volatility (see Calculating the Implied Volatility of the VIX for more details)

2 comments:

Dean said...

Hi Bill - thanks for your kind comments and for the correction about the chronology of introduction of VIX futures and options. I was also happy to see your confirmation that the SEC/CFTC regulatory split is responsible for brokerages erroneously using the VIX spot as the underlying for the options.

So the very agencies charged with obliging brokers to disseminate accurate information in fact use their power to force brokers to disseminate misinformation. So ironic, and yet so classic!

Dean

Dean said...

Re-reading my above comment - didn't mean to imply that the agencies purposely require anyone to misinform - just that the bureaucracy and turf wars end up ironically having that effect.

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