tag:blogger.com,1999:blog-897456774486153841.post1743685525423593762..comments2024-03-28T06:07:36.391-07:00Comments on VIX and More: Historical Volatility Continues to PlummetBill Lubyhttp://www.blogger.com/profile/01241003017364820134noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-897456774486153841.post-23670318546018827992009-06-11T10:44:43.145-07:002009-06-11T10:44:43.145-07:00I am definitely on the wrong side of today's m...I am definitely on the wrong side of today's market move (so far), but I am not yet convinced that SPX 950 will fail hold at the end of the day (which is where I take most of my signals from.)<br /><br />Right now the market is acting bullishly to all types of market news -- good, bad or neutral. Also investors continue to buy on the dip without worrying about the consequences of being wrong.<br /><br />Until those two things change, the markets will likely go up -- BUT I believe the risk/reward profile of many long positions has deteriorated with the recent move up.<br /><br />I still have long positions (mostly emerging markets and commodities) and will be glad to change my mind if the market continues to move up, but it will take a decisive move over 950 for me to flip back to bullish.<br /><br />Cheers,<br /><br />-BillBill Lubyhttps://www.blogger.com/profile/01241003017364820134noreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-71325351753943308082009-06-11T10:09:20.319-07:002009-06-11T10:09:20.319-07:00At a loss at how you keep encouraging people to be...At a loss at how you keep encouraging people to be bearish on the general stock market when the market keeps contradicting your blog entries.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-59040714879400942432009-06-11T09:11:00.939-07:002009-06-11T09:11:00.939-07:00Vovor,
I absolutely like the long straddle play h...Vovor,<br /><br />I absolutely like the long straddle play here. <br /><br />Laurent,<br /><br />I am a big fan of CPCE (less so of CPC) and follow these fairly closely. For the most part these are positively correlated with the VIX, but there are divergences. The work I've done with the VIX:CPCE ratio definitely shows it has some value as a market timing tool, but I can't say that I trade off of this ratio.<br /><br />Your theory about ITM options is an interesting one.<br /><br />I'll have to put this subject back into my R&D queue and see what I can come up with. (Maybe it's time I hired an intern so I could trade, write a book and publish a newsletter -- yet still have some time for some more new research...)<br /><br />Thanks for posting your thinking here.<br /><br />Cheers,<br /><br />-BillBill Lubyhttps://www.blogger.com/profile/01241003017364820134noreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-34527187589494382102009-06-11T08:36:16.579-07:002009-06-11T08:36:16.579-07:00Hi Bill, the SPX is quite flat since a few days, s...Hi Bill, the SPX is quite flat since a few days, so it's quite normal for historical volatility to go down. VIX measures the premium of out-of-the-money options treated on the CBOE hence it can't go down that quick.<br /><br />Something else: i've been thinking about these ratios i discussed with you last week. Besides the issue that SPX:VIX amounts to divide a price by a yield, i've considered SPX:CPCE instead. <br /><br />CPCE is the "equity" put/call ratio thus it considers all the equity options treated during a given day and constitute some sort of "instantaneous volatility" which is a bit higher than the one obtained by VIX. Especially, one may look at CPC:VIX and CPCE:VIX which should display flat areas where instantaneous and implicit volatilities match each other separated by transition zones where both measure of volatility diverge.<br /><br />Could these divergences be explained by saying that people in CBOE concentrate on in-the-money options thus anticipate minor changes in the near future ? What is your sentiment on this issue ? Best,<br />--<br />LaurentAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-897456774486153841.post-87246744934234521362009-06-11T08:34:55.587-07:002009-06-11T08:34:55.587-07:00This comment has been removed by the author.vovorhttps://www.blogger.com/profile/11093774305160858351noreply@blogger.com