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Keep going Doc, you are now speaking our language and have piqued my
interest at least. If we can get you off the cboe acadamia trail on to the
trading floor with some real nuts and bolts trading techniques something
will have been accomplished. This last post of yours is a good start. I
have always felt the cboe option seminars to the public were OK on the
basics but lacked the real meat of what it took to use them...some kind of
timing and valuation techniques. If it is contractually possible for you
to speak representing yourself rather than the CBOE I bet you could share
some useful insights.
BobR
At 05:10 PM 8/23/97 -0500, THE DOCTOR wrote:
>Your still kinda talking in circles. I'm agreeing that 1997 is the year
>when we see a decoupling. The reason is exactly as you
>describe..technology has heightened the elbows and assholes
>impact.....that is why implied spikes.
>
>Even if 97 were to close lower than 1996(not a forcast) I'm still not
>certain that...unless we could point to a dirrect effect(like dynamic
>hedging was in 87)we could draw a vol analogy.
>
>However there is huge problem with regressing implied vol to price over
>the short run. I'm not convinced that you aren't in effect looking at
>the same thing two different ways. I suspect that if there were a
>downtick rule for listed stocks vs the uptick rule the relationship
>would be exactly the opposite.
>
>Implied is really a measure of actual vol plus a whole series of non
>statistical inputs relating to supply/demand..ability to
>hedge....proximity to breakers on the S & P and NYSE....short term
>psychology and stuff non of us can really calculate.
>
>What would be extremely interesting would be to look at the spread
>between actual and implied(not historical and implied)and discover if as
>the difference widened was that occurance bullish or bearish.
>
>If you look at volatility forcasts(GARCH). You find that a few firms
>have actually gotten very good a projecting future vol. Now if I can
>project a future vol I can actually project a future price distribution.
>So these forcasts have become very profitable for pure vol
>traders...they have been benefical to price traders. I would expect
>that they would also be VERY VERY valuable to cash traders(I've heard
>they are actively being used in FX markets by the cash/forward folks but
>I really don't know about how successful they have been.
>
>The next chance I get to put my hands on a LIM or a David Bruce I'll try
>to determine if a simulation can be done.
>
>I would bet that prior to the mid 90's the relationship was
>inverse.....spread widens market declines. What will be curious is if
>it continues to be the case. Where is Blair Hull when you need him?
>
>
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