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Let me see .. it's been seven months since I left the CBOE.... what do I
still recall about VIX.
VIX, if I remember is calculated from front month puts and calls and the
next month puts and call (eight if I remember correctly ) that bracket the
OEX cash price. Those options were used because they have the most robust
orderflow of all OEX series.
Would it make sense to calculate a p/c ratio from those options. Sure it
would as a p/c ratio from the most robust series could very well be a better
measure. However not being a big believer in p/c ratio ..... except well
filtered so as to only show retail opening buys ....... I'm still not
certain what you would observe except on extreme days.
Are VIX strikes changed as the index moves. Yes they were when I was there
Dollar volume of puts and calls would be a wonderful indicator .. again
filtered for the opening buys. If that could be done it would be super.
The VIX switch occurs on the Monday of expiration week. So Vix on the
Friday before expiration week is using different options than VIX on the
Monday of expiration week.
I still continue to be a firm believer in understanding volatility as an
indicator is to look at the relationship between implied, as VIX represents
and actual market activity. When the two vary a great deal .... and the
amount of a great deal is different for different instruments.....there is a
lot of information value in the relative values.
It would be beneficial on a daily basis to compare implied and actual for
all the names you trade and look at when market/price turns have occurred.
-----Original Message-----
From: BobR [mailto:bobrabcd@xxxxxxxxxxxxx]
Sent: Wednesday, March 14, 2001 4:18 PM
To: realtraders@xxxxxxxxxxxxxxx
Subject: Re: [RT] GEN: Novice Notice
Questions for the Doctor:
1.
Since the VIX is calculated from the 6 nearby calls and puts, wouldn't it
make sense to calculate a P/C volume ratio from the six nearby strikes
rather than all those with volume?
Does the use of the nearby 6 reduce the influence of spreading? Why use the
6 nearby's?
2.
Are the strikes used in VIX calculation changed throughout the day as the
OEX passes through strikes?
3.
What is your take on the value of a dollar weighted P/C vs just volume?
4.
Which day of expiration week is the series used in the calculation switched
to the next month and is there a noticeable discontinuity or is the next
month graduated in as the current month goes out?
Thanks,
bobr
----- Original Message -----
From: "Jacobson, Alex" <AJacobson@xxxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Wednesday, March 14, 2001 12:47 PM
Subject: RE: [RT] GEN: Novice Notice
> Just to be clear 80% of it isn't fluff. About 60+% of option trading is
> nondirectional. Married puts would be just a trade. Where a long put is
> actually part of a synthetic long call.... stock + put = call. There has
> been an enormous amount of hedging activity completed in the past many
> months. Much of it occurs in the listed put market, but a great deal more
> occurs in the unlisted OTC collar market. This market is dominated by
long
> dated stuff which will probably not traded for many many months. Most of
it
> is dated after the first of the year anyway.
>
> -----Original Message-----
> From: Don Thompson [mailto:detomps@xxxxxxxxxxx]
> Sent: Wednesday, March 14, 2001 3:32 PM
> To: realtraders@xxxxxxxxxxxxxxx
> Subject: Re: [RT] GEN: Novice Notice
>
>
> Ira,
>
> So if these people are the insitutions, then the potential exists for a
fair
> amount movement.. The third situation is, if they do nothing into
> expiration, but that is stupid if they are sitting on a fair amount of
> value.
>
> But if they decide to exercise: Why is this dumping stock on to the
market?
> I just have a hard time getting the role of the
> market maker and the market they service.
>
> The good Doctor says about 80% of the option business is just fluff or
some
> kind of offsetting, because he says, or I interpret that the
> PC ratios published by the CBOE are just a couple of grain of salt.
>
> So why is this going to be a big deal?
>
>
>
> Ira wrote:
> > right now the most important thing is whether the holders of deep puts
> decide
> > to exercise and dump more stock on the markets or if they decide to
sell
> the
> > puts and force the buyers to purchase stock.
> >
>
>
>
>
>
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