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KalKal

KalKal

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Starski said:
@Ohene
@KalKal

Ok so you wana know more about vol :sas1: the best derivative in the game :blessed:

First some good recourses.
1. White paper on the vix = https://www.cboe.com/micro/vix/vixwhite.pdf
2. Overall depravities course by mark Meldrum( PhD) (You need to know derivatives to know the vix) -
3. The text used in the course - Options, Futures, and Other Derivatives, Global Edition | John C. Hull | download
4. Some of my favorite twitter follows
  • @Ksidiii
  • @dynamicvol
  • @spotgamma
  • @vol_christopher (( A must follow, no these people do not give you day trades but if you want learn his info is gold).
  • @vixologist
So anyway just a very simplified understand of the VIX is the most accurate way of measuring IMPLIED volatility(Implied is the key word, because the Vol. didn't happen yet.) @KalKal was close about what the vix is, but it's the spread of the weighted skew of options sold at different strike prices (Weighted is a key word here). Simply put it's a measure of all option buying with a strike price in the next 30 days, taking into account the ratio of total call / total puts & how far OTM or ITM they are.


Simple conceptual example. * LETS SAY IM WRITING THIS TWO DAYS AGO*
The same day i told ya puts were cheap but dont mind me :sas2:
Anyone may buy a $250 put with a one month strike price right now, but the vast majority of puts being bought sold/would probably (you can find info but not enough time rn) be within 5% of the current SP. To top it off a vast majority of all options bought/sold are probably calls. That 250$ buyer is looked at as insane. Now on the flip side imagine we sitting at 2500 during feb/march. Not only are more puts being bought, but well if you bought a 180 put it wasn't that "crazy" and the total volume of that option is significantly higher than the first example.
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*SIDE NOTE A POSSIBLE REASON WHY SELL OFFS ARE ALWAYS VIOLENT* A lot of firms long exposure( How long vs. how short they are) is inversely proportional to the VIX, as the vix rises x%, their longs/shorts decrease/increase by the same x%, respectively. Not all firms do but a lot in the derivatives business do. This is another reason why momentum has been crushing value since things have gotten more quantitative. As a stock rises, more calls are bought(Market markers BUY the stock because they now have to hedge), and therefore big money decreases shorts (Buy shares).

Futures are contracts to buy X and Time Y at Price Z. Very similar to options but they HAVE to be settled. SPX, Nasdaq, ec.t, futures are CASH SETTLED, commodities are PHYSICALLY SETTLED. If i have a gold future I'm actually buying 100x 1 oz pieces of gold. * KEY FACTOR WHY OIL FUTURES WENT NEGATIVE*. People were like "fukk :ooh: It's the day the contract expires and i have no where to put 100's of barrels of oil :to:...please take it from me" (That day was so fukking funny:deadmanny:)

TRADING THE VXX.
Future contracts are done in months, with the most forward month being referred to as the front month. The spot price refrees to the current price.
Two important definitions
1. Contango - When the future price is higher than the spot price
2. Backwardation - When the future price is lower than spot.
*Current Vix term structure* - VIX Term Structure

The VXX is currently 57.89% oct. VIX future and and 42.11% of sept VIX future. It's important to know this cause, lets say the sept future is settled and then the November future is now introduced to the vix. What happens if that future price is significantly lower than the sept price?(backwardation) the VXX can now be down x% while the vix is up x%. Could get fukked or the reverse happens :yeshrug:

This post is information and lets go back to mindlessly buying OTM tesla, apple, and spy calls :wow:




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Click to expand...


OK, so even though I still don't understand 100%, I think I'm picking up on one thing that I didn't actually get before:
The VIX doesn't go up because people expect the market to go down, the upward movement of the VIX is a consequence of the fact that the market has already gone down (because the calls that people previously bought are now way out of the money.) Is that correct? So it actually lags behind market a little?
 
O

Ohene

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Eric Brooks said:
CNBC is a shyt show lol. Analysts beg people who own tech to take profits because the valuations are stretched... OK cool...

But when asked "where to put money?" They have no answer...

We would all like to see a rally from value but is it really that important? Most of those names deserve to die.

So with no good suggestions that is why ultimately people just go back to tech.

And as I say that Docusign beat earnings easily because of course it did... the old blue chips are looking funny next to all the companies that actually turn huge profits.
Click to expand...
why is Docusign still down big despite the earnings results?
 
Starski

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KalKal said:
OK, so even though I still don't understand 100%, I think I'm picking up on one thing that I didn't actually get before:
The VIX doesn't go up because people expect the market to go down, the upward movement of the VIX is a consequence of the fact that the market has already gone down (because the calls that people previously bought are now way out of the money.) Is that correct? So it actually lags behind market a little?
Click to expand...

The vix is future looking by 30 days. In the simplest form a higher vix = more people are buying puts that are out of the money with expectations date <30 days. So inverse is true with lower vix (more calls).

I have the example in hopes to show case the importance of it being weighted. If 50% of all options are puts. And .1% is some crazy put option, it doesn’t affect the vix. But if 50% of all options are puts and 5% are deep OTM, that will lead to a higher vix.
 
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