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The Option Block

The Option Block All-Star Panel breaks down the latest developments in the options market, analyzes unusual options activity, explains cutting-edge options strategies, answers listener questions and much more. Whether you're an active options trader or just getting started in the options market, The Option Block will keep you informed and entertained.

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  2. Volatility Views 140: It All Starts with Onion Volatility

Volatility Views 140: It All Starts with Onion Volatility

Dec 22, 2014

Volatility Views 140: It All Starts with Onion Volatility

Volatility Review: The week in vol

  • VIX Cash: High - 25.2, Low - 16.07. S&P: 10 day HVOL - 22, 30 day HVOL - 13, Skew Index - 126.4, at the low end of the chart for the past three months.
  • VVIX: High - 141.22, Low - 109.4, nearly doubled over the past two weeks.
  • VIX Options: Total 4.29m (2.97m Calls, 1.32m Puts), only one day over 1M contracts this week despite significant market movement.
  • VXST: High - 25.47, Low - 14.06, another week of anemic volume.
  • RVX: 227 contracts OI, still no appreciable volume.
  • Oil: Another crazy week for oil - a pronounced selloff followed by a dramatic rally that triggered circuit breakers on ice. 2-3 month vol hovering between 38-50, depending on the product. Putin tell the world to "get ready of $40 oil". Oil slump blindsided bulls that wagered on rout ending.

Volatility Voicemail: Listener questions and comments

  • Question from Vic Taylor - What is the problem with OVX? USO trades a ton of options, yet OVX averages 100 contracts on a good day. I am looking for a good way to add some oil volatility to my portfolio. Since OVX is DOA, are there other dedicated oil volatility products out there that actually trade? Maybe something listed on the WTI or Brent contracts? Cool show. Love all the commodity focus you have added in recent months.
  • Question from Jim Andrade - I know you have mentioned bullish risk reversals in CL as potential ways to play a bullish bet in crude. I have been a little slow pulling the trigger. Is the environment still favorable for this type of trade in CL? I'd consider Brent as well if that is more suitable. In case you cannot tell, I am a bit of an oil bull, but I've been waiting for the worm to turn. I think we may have finally hit that point. What about an iron fly, where I buy ATM sell 5% OTM? Would that be preferable from a volatility skew perspective? Maybe I should throw in a time value of money question also. I like it when Jared gets worked up over futures term structure and roll yield.
  • Comment from Mark Brant - The sum of new Friday weekly SPY and VXX ATM calls is lower than each’s range, so bought both calls! 52-wk. +ev?