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//Strange Things Happening in Europe //

Don FishbackStock Market, VolatilityLeave a Comment

Two strange things are going on in Europe. As the chart below shows, there has been a big increase in the quantity of government bonds that have a negative yield. The big bear market that hit US stocks in the 4th quarter of last year has had a huge impact on rates both in the US, and especially in Europe. … Read More

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//Hedge Funds Are Shorting the VIX at a Rate Never Seen Before //

Don FishbackVolatilityLeave a Comment

There is an article on Bloomberg.com talking about the gigantic short position large speculators have in the VIX futures. There is one important fact that this brings up: It’s near impossible to determine what this actually means, given the fact that nobody knows the rest of the story. That is, are these outright bets that VIX is going to fall? … Read More

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//Jamie Dimon Likes Straddles //

Don FishbackProbability, Stock Market, VolatilityLeave a Comment

OK, maybe he doesn’t really “like” straddles. But what he does say implies that the market conditions going forward will have characteristics that are conducive to long straddles. Dimon Sees Recent Volatility as Harbinger of Things to Come A few of the reasons given include what we just wrote about a few days ago: declining liquidity. A key nugget in … Read More

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//Declining Liquidity //

Don FishbackStock Market, VolatilityLeave a Comment

This article is behind a paywall. But the headline provides the key point: Liquidity of the E-mini S&P 500 futures contracts is shrinking – hit hard after the two volatility shocks in 2018. Liquidity provides a cushion for those times when the market goes haywire… up or down. When that cushion disappears, volatility has a tendency to be higher than normal. … Read More

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//Volatility Low Everywhere //

Don FishbackGeneral Investing, VolatilityLeave a Comment

On Monday the 18th, in our ODDS Community we were posting and talking about how low volatility was everywhere. We also talked about the right strategy for low market volatility in the community and our ODDS Online coaching class. If you missed the conversations, it’s not too late to check it out. Our strategy for exploiting low volatility earns profits … Read More

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//Crowding is Back //

Don FishbackGeneral Investing, Stock Market, Uncategorized, VolatilityLeave a Comment

I recently recorded a video about market fragility and how Dispersion Trading can be an elixir to markets that experience explosive volatility out of nowhere. But what causes that explosive volatility in the first place? The answer is low liquidity. Rising rates have a lot to do with it. But another factor is “crowding”. And there are two developments that … Read More

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//Something Missing? //

Don FishbackOptions, Probability, Uncategorized, VolatilityLeave a Comment

If you’re into probability — that would be anyone who has ODDS in their name like I do — this is a thought-provoking chart from a Bloomberg article this morning. I’ve created charts similar to this in the past using my trusty spreadsheets. What they’ve done that is different from the normal bell curve is that instead of using the … Read More

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//Volatility of Volatility //

Don FishbackOptions, VolatilityLeave a Comment

Here’s an interesting post about volatility of volatility. Volatility of Volatility as an Edge I’ve done some research myself on the subject and can confirm the results, which appear to be isolated to the performance of calls. That is, call options on stocks where the historical volatility of the one-month at-the-money implied volatility is low (1 in the chart) perform … Read More

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//VIX Implied Volatility is Very Low //

Don FishbackStock Market, VolatilityLeave a Comment

VIX has come down from its recent peak. But the real story to me is what’s going on in the VIX options market. In the recent past, whenever VIX shot higher the implied volatility of VIX options (ticker symbol:VVIX) also shot higher. For instance, in August 2015, when China devalued its currency, VIX climbed to 40.74. The implied volatility of … Read More