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The OEX call and put implied volatilities seem to be in line with a VIX
that closed at 18.13 on Friday. What does your 6day/100day ratio suggest
to you?
BobR
At 09:59 AM 7/17/1999 -0400, Gitanshu Buch wrote:
> Trying out the new listserver. The VIX would seem to indicate that OEX
>vols have come in to 12 month lows - July 98 pre-20% correction levels.
> prices? The shoot-from-the-hip response to a low VIX is that the market
>is complacent - and that a major move (unknown directional predictability)
>is about to start. For example, the market tanked 20% from the low July
>17-20 1998 VIX readings. area. So while there is some anecdotal
>evidence to back the launch of a major (multi-week trending) move from
>these VIX levels, the low VIX does not seem to be reflected in option
>prices compared to recent option price behavior. put spreads for
>between $1.875 and $2 all day long, taking the offer on the closer strike
>and hitting the bid on the away strike (ie, buying and selling at the
>market). Since June 24's price action, most 5 point increment spreads
>have widened to $2.875-$3.00 if I were to do these at the market. Still,
>VIX keeps falling, the market's historical volatility ratios keep making
>lower tracks, the prevailing price trend continues unabated. What gives?
> These strikes are close enough to price (eg if OEX = 733, the 735/740
>call spread or the 730-725 put spread) that the volatility "smile" isn't
>majorly impacted. Not until I get to Last traded prices (not the
>bid-offers) on the 740-45 strikes does the price approzimate $2. Maybe
>it is the way off-floor brokerages work, but all week last week I was
>trying to get stuff done and the prices came back quoted 25%-32% implieds
>(cox model), FAR above the VIX levels being reported, I am aware that vix
>"rolls forward" one month once we get into the last 8 days of the front
>month's expiration cycle. But floor quoted prices sure do not reflect
>what is happening. Any clarification would help. Maybe I got lucky in
>the Apr-June period - but my vol numbers were matching VIX more or less
>with 1 or 2 rare exceptions (I thin the Apr 29 40 handle bi-directional
>OEX move was a big one) - and even generally speaking tends to agree with
>non equity-market experience of trading ranges where implieds initially
>seem to expand before really coming in as price continues churing inside
>the range. Thank you, Gitanshu Attachment Converted:
>"c:\valet\eudora\attach\vix1.gif"
Attachment Converted: "c:\eudora\attach\Stateval.gif"
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