Monday, September 17, 2007

Fireworks Forecast for the Next Few Days

It doesn’t take a lot of courage to predict fireworks in the markets following tomorrow’s Fed announcement, but it is interesting to wonder which stocks will be the biggest movers.

A scan of some of the stocks with the highest implied volatility tells a good part of the story. From the group below comes some obvious choices, such as home builders and lenders. There are also two Chinese companies, including one in the red-hot solar sector, as well as various natural resources plays in gold, oil/gas, and dry bulk shipping. Then, of course, there is the VIX itself.

[The chart above includes only front month at the money options with an IV of 70 or more and a relatively low bar for volume and open interest.]

For the record, the current VIX IV is right in the middle of the 52 week range and has been below 30 day historical volatility for the past month or so.

I have included a Yahoo finance link to all nine high IV stocks (actually eight stocks and the VIX, but who’s counting…) for those who like to play with fire. As I write this, I’ve begun to wonder whether traders are more likely to have been pyromaniacs as children. Hmmm. Are traders more or less prone to having risky hobbies? Lurkers, feel free to weigh in on this one.


Beta Data Blogger said...

Great post. What tool / service are you using to universe sort on implied vol?

Thought you would like these two links

Should be a fun day..


Anonymous said...

Hello, I just have question ... does the vix futures settle at the same price than the index ?

Sory for my english !! from Switzerland !!

Bill Luby said...

Good stuff, JC. Thanks. I found the second article particularly interesting -- and one that applies to me.


Since I do not trade VIX futures I had to research the answer to your question. As best as I can determine the short answer to your question is 'No.'

VIX futures settlement prices are determined by the Special Opening Quotation of the VIX (the same one that is used for options), which does not necessarily correlate with the opening price for the VIX index.

In their discussion of rolling positions, the CFE (CBOT Futures Exchange) even goes as far as to caution "in order to avoid exposure to a potentially substantial difference between the final settlement value for VIX futures and the VIX index level, investors holding speculative, or un-hedged, VIX futures may wish to either close out their positions or roll to another contract month prior to settlement..."

You can find the previous VIX futures settlement values here if you wish to do some additional analysis.

Thanks for the questions. The more people ask, the more I learn.

One final note. I spent part of my honeymoon in Switzerland (Montreux, Grindewald, etc.) and my wife and I can't wait to go back.

Cheers and good trading,


Bill Luby said...


JC, the IV screener comes from optionsXpress, which has an excellent of options-related tools.

DISCLAIMER: "VIX®" is a trademark of Chicago Board Options Exchange, Incorporated. Chicago Board Options Exchange, Incorporated is not affiliated with this website or this website's owner's or operators. CBOE assumes no responsibility for the accuracy or completeness or any other aspect of any content posted on this website by its operator or any third party. All content on this site is provided for informational and entertainment purposes only and is not intended as advice to buy or sell any securities. Stocks are difficult to trade; options are even harder. When it comes to VIX derivatives, don't fall into the trap of thinking that just because you can ride a horse, you can ride an alligator. Please do your own homework and accept full responsibility for any investment decisions you make. No content on this site can be used for commercial purposes without the prior written permission of the author. Copyright © 2007-2023 Bill Luby. All rights reserved.
Web Analytics