David H. Annis, Ph.D.(@VernonCapitalDA) 's Twitter Profileg
David H. Annis, Ph.D.

@VernonCapitalDA

Principal, Strategy & Investment
Quant Finance, Algorithmic Portfolios, Volatility

ID:1512517416777101313

linkhttps://vernoncapitalpartners.com/ calendar_today08-04-2022 19:48:24

507 Tweets

769 Followers

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David H. Annis, Ph.D.(@VernonCapitalDA) 's Twitter Profile Photo

$SPX up almost 1%; $VIX up 1%... just another day at the office.

There's a lot of session left, but if we finish here, it would be unusual. The $VIX rises at least 1% the same day $SPX rises at least 0.8%, on average, two or three times a year since 1990.

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David H. Annis, Ph.D.(@VernonCapitalDA) 's Twitter Profile Photo

There are many confounding factors, however, a cursory examination suggests that the end of forward guidance may not bring with it a permanently higher level of volatility. Volatility may increase for many reasons, but I suspect not for lack of Fed guidance.

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David H. Annis, Ph.D.(@VernonCapitalDA) 's Twitter Profile Photo

$VVIX may be an interesting quantity to examine, however, since options on $VIX were only listed in 2006, $VVIX can only be calculated back to that point, and therefore has very little pre-forward guidance data associated with it.

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David H. Annis, Ph.D.(@VernonCapitalDA) 's Twitter Profile Photo

This is just a conjecture. If someone has historical put/call ratio data for $VIX options, please let me know if there's anything to it or if I can add it to the list of plausible hypotheses that don't hold when tested.

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David H. Annis, Ph.D.(@VernonCapitalDA) 's Twitter Profile Photo

If this is indeed happening, a second-order effect may be the error introduced by approximating an integral by a sum over a discrete grid of strikes. If fewer puts are traded, strikes below a certain level become ineligible and approximation worsens and is biased downward.

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