Posts Tagged ‘volatilidad implicita


Paper: Instrumentos de volatilidad como hedge

Using Volatility Instruments as Extreme Downside Hedges

“Long volatility” is thought to be an effective hedge against a long equity portfolio, especially during periods of extreme market volatility. This study examines using volatility futures and variance futures as extreme downside hedges, and compares their effectiveness against traditional “long volatility” hedging instruments such as out-of-the-money put options. Our results show that CBOE VIX and variance futures are more effective extreme downside hedges than out-of-the-money put options on the S&P 500 index, especially when reasonable actual and/or estimated costs of rolling contracts have taken into account. In particular, using 1-month rolling as well as 3-month rolling VIX futures presents a cost-effective choice as hedging instruments for extreme downside risk protection as well as for upside preservation.

Link al Paper


Hedgeate un black swan…

Risk.Net tiene un post donde introduce un nuevo desarrollo de CBOE: un instrumento que permite tomar posiciones frente a eventos de baja probabilidad (tail events).

“The skew index will offer the chance to take hedging or speculative positions on the skew of S&P 500 Index options, and consequently on the investors’ perception of forthcoming tail events such as extreme losses,” explained Shalen.

Skew reflects the fact that implied volatilities on options vary with strike levels, and is driven by supply and demand dynamics in the equity derivatives market. Historically, investors have purchased out-of-the-money puts to hedge their equity positions and sold out-of-the-money calls for premium. As a result, volatility for low strikes has increased, while volatility for high strikes has decreased.

If market participants expect a crisis, they would be more likely to buy put protection, which all things being equal would contribute to an increase in skew. Market participants could therefore take long positions in the index to hedge against future expectations of a tail event. Those who feel expectations of a crisis are overplayed could decide to short the index.

Shalen says the new product shows no correlation with market volatility, and any rise in the index is associated with the perception of correlated jumps in index stocks that occur during market crises.

En la nota se cita el siguiente paper de Peter Carr Towards a Theory of Volatility Trading (2002)


¿Manipular el VIX?

Adam Warner toma esta pregunta (referenciada principalmente a un posible objetivo del Gobierno Estadounidense) y la responde elegantemente en un post.

Want to know how you can “manipulate” the VIX?

You would have to do something radical like … buy some near-term puts on the S&P 500 (SPX). Yes, believe it or not, that’s basically all the VIX measures. It’s an index of volatility on SPX options normalized to 30 days duration.

The government, or an average-size hedge fund, could spend a few million dollars and pay up for some puts. It would lift implied volatility across the board for a short time, with the chance of the elevated volatility persisting if it caused a chain reaction.


Which brings up another point: It’s overwhelmingly likely that VIX broke above 30 thanks to a weak market. So what did the VIX tell you that you couldn’t infer anyway? The answer in this narrow case is nothing.

So, to answer the original question, there are a lot of things to worry about out there. The government buying or selling some SPX  puts to influence a volatility index is hardly one of them.


La mueca del VIX

Adam Warner tiene breve post sobre la mueca (skew) del VIX y la percepción de los cambios en el mismo (el VIX) desde el mercado de opciones.


The VIX uses a set formula based on the volatility of each qualifying SPX option. It normalizes to create a 30-day option, so it will incorporate the two nearest expiration cycles, up until the nearer one gets within eight days of expiration, at which time it leaves the calculation.


The next thing it does is weigh the options such that closer strikes carry more weight. And that’s where skew comes into play.


What I’m trying to say is that many of these VIX tweaks are simply mathematical. Skew is on the high side right now, so the effect is particularly pronounced at the moment. But for a guy simply trading SPX options and not caring about the VIX, he would not detect any change in volatility.


Paper: Alpha y volatilidad

Alpha Generation and Risk Smoothing using Volatility of Volatility

Volatility of returns has been studied extensively in the literature but volatility of volatility (vovo for short) has been given very little consideration. This paper takes an expository look at vovo and discovers some remarkable results and concepts. These include alpha generation and risk smoothing strategies along with tactical asset allocation insights. Most of these results are quite novel due to the lack of current research on vovo.
The paper starts with a discussion of the mathematics of leverage. It produces a formula for the optimal leverage of an investment for a given market environment. It may come as a surprise to some that there is an optimal leverage since it may seem that if the return from an investment is greater than the cost of borrowing then the more leverage, the better the return. However, it is shown that volatility exerts a drag on the return of leveraged investments and the drag, being a squared function of return, eventually overwhelms any extra return that comes from using leverage.
Leveraged Exchange Traded Funds (ETFs) are used to illustrate the principles. We show how ETFs can be used to implement continuously dynamic leverage. We also clear up a myth about long term holding of leveraged ETFs. Sample data id shown from a number of stock markets including data from as far back as 1885.
Link al Paper


VIX pre- Crisis 2008

(Fuente: Vix and More)

El jueves 20, el VIX llego a 45,79. Sin contar el desarrollo del VIX en la Crisis 2008 (llego a 80), el pico de ayer ocupa el número 3.

(Fuente: BBC)


a todo esto, ¿Que paso con el VIX?

Vix and More tiene un gráfico que muestra los saltos del VIX.


it seems sacrilegious to potentially overlook the fact that the VIX spiked more last week than in the entire history of the VIX, even including reconstructed VIX data going back to the beginning of 1990. The 85.7% jump in the VIX last week easily surpassed the previous record of 75.9%, which was from the week of February 27, 2007, when the Shanghai Stock Exchange composite index fell 8.8% in one day.


The difficulty in dismissing the current crisis is that as volatility has a tendency to cluster, so do financial crises.



Consejos de traders para traders

Brett Steenbarger y Mark Wolfinger -desde sus respectivos blogs- hacen recomendaciones de formación (Steenbarger) y de manejo de riesgo (Wolfinger) basándose en sus experiencias personales.


In general, I would highlight three areas of learning that I would want to have if I were looking to start out as a trader today:

1) Macroeconomics – I would want to have a grasp of intermarket relationships and how monetary policy affects interest rates, currencies, and economic growth. This information may not determine the trade over the next half-hour, but it does govern the market’s longer time frame picture and help determine market trends. A lack of understanding of macroeconomics and intermarket relationships has been a major reason many short-term traders have lost money fighting the market over the last few months.



It’s very important to understand the difference between trades that are well-managed and those that luckily end well.  This is a subtlety lost on too many.  The ‘obvious’ but inaccurate conclusion is often: ‘If I made a profit then it was a good trade and I must have handled it well.’

To understand the risk of any given position (or portfolio), it’s essential to know

  • How much can be lost, if the worst case scenario occurs
  • How much can be lost today, under unusual market conditions
  • What you have to gain by holding the position; i.e., potential profits
  • The probability of earning a profit from the position as it exists now
  • How theta (the passage of time) affects the position
  • The effect of a large change in implied volatility (vega risk)



Entendiendo Volatilidad

En un reciente post de Daily Options Report –donde se vuelve a analizar el rol del VIX-, Adam Warner ilumina el escenario de como leer correctamente la volatilidad.


buyers do step in for “cheap” volatility. And get their faces ripped off. Cheap is only relative to the volatility of the underlying instrument. And if the underlying is not moving, you better watch out buying paper. Everyone learns this lesson the hard way.


Even though it ostensibly looks forward 30 days, the VIX does a better job telling you what already happened than what’s up in the future. About 3/4 of the VIX level is explained by the recent past and 1/4 is a forward looking estimate. And often an obvious one, like the Fed’s about to speak, the market may move.


You have 10 options screens in front of you, each with individual stock volatility doing all sorts of things in all sorts of time frames. Not to mention the stocks themselves doing what they do.The VIX is the narrowest of measures, it’s 30 day volatility on one index. It’s a terrific proxy to give you an impression of what’s doing in volatility in the blink of an eye, but it tells a tiny fractiion of the whole story and thus should not be treated as some sort of gospel to the penny.



Paper: Precios, Extremos y Volatilidad

How the 52-Week High and Low Affect Beta and Volatility

We provide a new perspective on stock price behavior around 52-week highs and lows. Instead of focusing on noisy measurements of abnormal returns (alpha), our main focus is to analyze whether a stock’s beta, return volatility and option-implied volatility change (i) when stock prices approach their 52-week high or low, and (ii) when stock prices break through these highs or lows. We find that betas and volatilities decrease when approaching a high or low, and that volatilities increase after breakthroughs. The effects are economically large and very significant, and consistent across stock and stock-option markets. Among several explanations for our findings, we find most support for the anchoring theory.

Link al Paper

Fun & Finance


Fun & Finance Rollover

"It is hard to be finite upon an infinite subject, and all subjects are infinite." Herman Melville

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July 2020



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