Volatility

Machine Learning & SciKit Learn

I made the point to someone the other day that technology and coding is getting easier and easier to accomplish. I don’t think I would have been able to perform ‘machine learning’ five years ago but with the resources available today (Python, SciKit Learn, and pages upon pages of StackOverflow) even someone like me can fit a model and build ML algorithms. Machine Learning is also ridiculously “easy”. It’s literally 4 lines of code. It…

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Long Crude Oil via Inverse ETFs

My best idea for 2016! I started writing about this on twitter in December after a friend pointed it out: $DWTI short will be trade of 2016 h/t to Bensonhurst buddy for pointing it out #Prognastications #RemembertheSKFs? — LargeCapTrader (@largecaptrader1) December 18, 2015 $DWTI no options but $SCO does. Like me some 1×2 call spreads to finance downside puts or put calendars #2016 #Decay — LargeCapTrader (@largecaptrader1) December 18, 2015 I don’t have a strong…


Enhanced Covered Call Writing – AQR Paper

Covered calls are an extremely popular strategy utilized by large institutions and retirees alike. As chase for yield continues it will likely continue to be popular as it is sometimes viewed as an equity income trade or enhance income trade. Take a look at S&P index skew or call skew for most S&P underlying to see the downward pressure in pricing of calls versus puts due to flows. AQR put out an interesting paper in…


VIX ETP Performance in 2014

As pointed out by my friend @stkbullgod the VIX ETPs had an interesting year. Check it out: One would expect SVXY to be UP around 25% given where VXX is but that is not the case. There is a 36% difference! The VXX borrow rate was ~5% on last check so let’s say 30%. Similar results with XIV (I focus on SVXY as it is an ETF with options as opposed to XIV which is…


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XIV & ZIV historical data

Perusing the internet I found a neat little site: quantstrattrader.wordpress.comĀ  On one specific post, a commentator posted his link to reconstructed XIV, ZIV, VXX, and VXZ from 2004 using historical VIX futures and the methodology from the prospectus. Good stuff and huge thanks to quantstrat and Helmuth Vollmeier! VXX: https://dl.dropboxusercontent.com/s/950x55x7jtm9x2q/VXXlong.TXT XIV: https://dl.dropboxusercontent.com/s/jk6der1s5lxtcfy/XIVlong.TXT VXZ: https://www.dropbox.com/s/y3cg6d3vwtkwtqx/VXZlong.TXT ZIV: https://www.dropbox.com/s/jk3ortdyru4sg4n/ZIVlong.TXT   Edit 11/10/14: After some thought I realized the simulated XIV/ZIV data may be incorrect. While it follows the…


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Go home & get your shine box

An article in FT caught my attention with a clever headline: Why the new shoeshine boy trade is shorting volatility It immediately reminded me of Goodfellas. The basis of the article is comments from Christopher Cole of Artemis Capital. His pieces are well researched and always interesting. His original piece can be found here and I recommend reading it! One argument Mr Cole makes is that the market can simply be broken down into short…


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Quick Note on Vol

Being short vol has been no fun this year. Everyone wants to know how bad it will get. XIV has a short history but here’s the draw downs: Just eye-balling, the 2011 draw down took about 8 months or so to revert back to 52 week highs, with the next being about 4 months in summer of 2012. It looks to take about 2 months to reach it’s zenith or so before beginning to revert….


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2013 Year in Review

The Good- I had my best year trading from an absolute profit standpoint. I had my capital allocation bumped 3x this year. I just found out last week on #3. Trading volatility, especially in the last quarter of the year, was excellent. The Bad- Although I had some great stock and risk arb deals (Rue21, ChipMos, Digital Generation, Focus Media) I had some equally phenomenally bad calls (NamTai, Brookfield Property Partners) When looking at the…


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Short SPX Calls

Many of the strategies I utilize or investigate tend to be correlated with short volatility strategies or perform in ‘stable’ markets and performance tends to deteriorate in risk-off phases. Additionally many long-short or qualitative managers short an index or ETF like SPY or IWM’s when they feel it necessary to have something on the other side with lack of an alpha short. In looking to hedge some of these strategies I always wanted to consider…


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An Interesting Thing Happened to VX Yesterday

With the government deadline looming, VIX and volatility have been on fire with massive volume, ranges, and trading opportunities. I was struck though with the deafening tone of negative comments from congressional leaders and the perception that the debt ceiling negotiations were basically collapsing, the following transactions occurred at the 4:15 EST close: There were similar although smaller transactions in other months. Low and behold, the next day there are rumors out of an imminent…