Well after week of capturing the volatility data from my TOS platform and doing the calcs, I can already notice a few things:
- The VIX is not a very reliable indicator of vols as it finished relatively flat on the week but the at the money implied volatility on March options actually crept higher. Check out Mark's article about this. (Option Pit blog)
- Downside skew has also been picking up. Was this an early indication that the market was pricing in some kind of a sell off and the Libyan situation happened to give it an excuse?
- Contango between March and April term structure is on the increase after the spread was very tight a couple of weeks back. Will this continue as it has remained high over the last 2 years relative to how it normally is or will it come down to these levels again after this sell off? In my opinion I do think that elevated levels of contango will remain for years to come as I still see various and frequent shocks continuing to hit the world's financial markets (I think the world is in longer term a transition period).
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