tag:blogger.com,1999:blog-3476070578111773793.post6303843395866673108..comments2010-03-10T11:53:48.331-05:00Comments on I'll give you an option . . .: Predictive VIXESPhttp://www.blogger.com/profile/05676885769176399002noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-3476070578111773793.post-80774283004344455392010-03-10T11:53:48.331-05:002010-03-10T11:53:48.331-05:00Dean and Scott,
Thanks for your comments. The wo...Dean and Scott,<br /><br />Thanks for your comments. The work was done based on trading days as opposed to calendar days. So the 60 day look back, means 60 trading days or approximately 3 calendar months just as the 120 forward holding period is trading days or approximately 6 calendar months. <br />With regard to the reseting of positions like the rolling of buy-write strategies. Remember that the VIX is a weighted average that is perpetually 30 days long so if the roll is done near the front month expiration, rolling the buy-write would actually depress the VIX since the roller would be selling the second month options which would have a greater weighting in the VIX calculation.ESPhttps://www.blogger.com/profile/05676885769176399002noreply@blogger.comtag:blogger.com,1999:blog-3476070578111773793.post-54442753041490907652010-03-10T04:00:32.195-05:002010-03-10T04:00:32.195-05:00Agree with Dean, always convert the VIX to busines...Agree with Dean, always convert the VIX to business days for a really precise analysis. However on the timescales you are looking at you are probably OK here.<br /><br />Secondly, it's useful to think about these days in terms of SPX option vols. You have found those rare days where front month option vol increases as the SPX increases. <br /><br />3 possible reasons are buy-write strategies resetting their strikes to higher levels, short gamma option traders getting badly hurt on a large up move and buying back their gamma, or new protection being taken out at higher levels as old put options become worthless.<br /><br />All 3 are part of a process of "resetting" of the vol surface around a new index level. It is generally thought to indicate that the vol market is "happy" at this new index level, I guess you can say that means trends that are in place should continue.Scottnoreply@blogger.comtag:blogger.com,1999:blog-3476070578111773793.post-24445186323230957782010-03-09T20:31:31.137-05:002010-03-09T20:31:31.137-05:00Interesting research. Have you thought of adjusti...Interesting research. Have you thought of adjusting for Fridays and Mondays some way because as I'm sure you know, the weekend time decay often gets discounted on Friday. So if the SPX and VIX were both down on Monday, I would consider that much more meaningful than if they were both down on a Friday.Deanhttp://www.masteroptions.comnoreply@blogger.com