Volatility Views Episode 3: Root-Mean-Square
\nWeek in Review: Slow and low? That's the volatility understatement of the year.\xa0 Ten-day realized vol is near two-year lows.\xa0 Is this the eye of the hurricane or the calm after the storm?\xa0 Implied vol really low, although IV ended up on the week in the S&P 500.\xa0 Market doesn't completely trust the low vol levels.
Strategy Session:\xa0 Continuing last week's discussion, we begin looking into logical errors when deriving volatility over discrete periods.\xa0 The simple answer: Root-Mean-Square.\xa0 Don walks us through the math, as well as the usefulness of this method when looking to hedge volatility exposure over a longer period of time.\xa0 Cheap volatility and buying or selling premium?\xa0 Mark and Don discuss their own thoughts on these two matters.
Crystal Ball:\xa0 Yay...no government shutdown, which may actually put a damper on upcoming vol.\xa0 However, if oil continues to rally, and indications of interest are rates rising, we'll see increases in IV.\xa0 Good news doesn't rally market = warning sign.\xa0 Upcoming numbers to watch:\xa0 Retail sales; beige book; Michigan sentiment; PPI; CPI. GVZ: Gold vol index starts trading options at CBOE starting 4/12.\xa0 When will oil and the broader market diverge?