EP013: The Option Volatility Episode

Broken Pie Chart

Welcome to the Broken Pie Chart Podcast Episode 13. In this episode Derek Moore is joined by ZEGA Financial Founder Jay Pestrichelli to discuss volatility as an asset class, implied volatility, the VIX Index and more.

Key Takeaways:

• • What is the VIX Index?
• • Volatility Indexes for the Nasdaq 100 VXN and the Russell 2000 Index RVX
• • How is the VIX Volatility Index constructed?
• • What is implied volatility vs historical volatility?
• • How implied volatility looks to predict perceived potential trading ranges for underlying assets
• • Options premium pricing around earnings and other events
• • Probability based credit spread selling strategies
• • How probability calculations illustrate options market perception of 1 standard deviation and 2 standard deviation moves
• • Benefits of adding alternative income strategies such as short volatility to potentially provide income compared to bonds
• • How selling deep out of the money credit spreads can potentially generate returns in up, down, or flat markets
• • Differences in ZEGA’s High Probability Options Strategy compared with the ETFs and funds shorting volatility using VIX Futures and options
• • Thoughts around the “Volpocalypse” or “Volnado” when funds shorting volatility ran into trouble
• • How risk management in selling volatility is key and picking spots to tactically enter markets increases probabilities

Mentioned in this Episode:

Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk

Buy and Hedge Book by Jay Pestrichelli and Wayne Ferbert https://amzn.to/2TaBmO5