Tag: VIX
Hedging an equity portfolio: Volatility
In our last article, “Why Traditional Hedges Fail,” we opined that most traditional hedges had significant weaknesses and did not have many characteristics of a great hedge. Volatility (long positions in VIX futures), while not perfect, has a number of these favorable characteristics for hedging an equity portfolio. The characteristics of an excellent equity hedge […]
Downside Analysis to the Next Level – Look at Partial Moments for an Edge
A close look at the VIX index shows a very skewed distribution as low levels push against a barrier. There is more risk that the VIX will rise versus fall. The same can be said for many other asset prices. Normality is out; non-normality with respect to distributions is in. The value of looking beyond standard deviation is all the more important in the current environment.
VVIX vs. VIX – Is something Wrong Here?
The VIX index is an effective measure of volatility expectations. The CBOE VVIX index measures the volatility of volatility for the VIX. If the volatility of volatility is increasing, there should be the expectation that volatility itself should also be increasing. We are seeing that the ratio of the VVIX to VIX is at high levels. Granted the VVIX index is off from recent highs, but the VIX index has continued to move lower even with the heightened policy uncertainty we have discussed in the past with our post on the one chart to look at for the new year.
August Calm Gives Way to Limited Opportunities for Managed Futures
September came and went with a relative whimper. It was our view that various key macro events scheduled throughout the month coupled with uncertainty over monetary policy, had the potential to produce significant moves across global markets. As it turned out..with the exception of the commodities sector…this was not the case. U.S. equities ended the […]
Was August the Calm Before the Storm?
Historically the summer markets coincide with tight ranges and low volume. Trends seem to dry up, markets trade in tight ranges, and short-term opportunities can be rare. For instance, the past 30-day range in the SP 500 has been the tightest range since 1995. That particular market led to a 180% rally in the stock market over the […]
Madison Park Capital Management – Strategy Philosophy
As our marketing efforts gradually shift from focusing on individuals to institutions, we have been asked recently, more than once, to provide a theoretical framework for our investment philosophy and trading approach. Although our trading results continue to validate our strategy, we were more than happy to take on this challenge, go back to review the genesis of our ideas from over a decade ago and review why our methodology still stands to reason.
Goldman Management – CTA performance commentary June 2014
In the first three weeks of May the S&P’s trading range was extremely compressed at roughly 1% with the previous 13 weeks having been limited to a 5% range, representing a measure of suppressed volatility that has not been seen in 8 years. In addition, numerous volatility measures also moved to the lowest levels in years, as is the case with VIX, which fell below 11 last month, the lowest since February 2007. Entering the month of June the S&P broke above this narrow range and advanced in the first three weeks despite the turmoil in Iraq. The S&P has rallied in the last two months without a single daily gain or loss +/- 1%, a rarity as well, with a prior occurrence in 1995. Furthermore, the S&P finished in the top 25% of the daily trading range (the S&P point change from the previous day/ the S&P daily range) in the first 20 trading days of the month, which is an unusual occurrence, having been seen less than a dozen times in the past 55 years. This trend continued into month end, driving the 40 day average of the formula into the top 31% of the daily range. This has occurred just one other time going back 55 years, having last manifested in the middle of May, 1995. The present backdrop is different than in May 1995 as the S&P then traded sideways the previous year and experienced a 10% correction induced by the Federal Reserve raising rates.