Mar 30th, 2011 by Tariq Scherer
Unfortunately, much to my surprise, this site’s online advertising partner closed its services on me for reasons still slightly unclear. This leaves the website bereft of much love, oh wait, I meant money, which is unfortunate really.
It is not that this website is only driven by the good ol’money, but still, there is a point of principle here. No one works productively for free and this blog is not about to make an exception either.
It really is a shame, actually, as the site’s been a good outlet for some personal research, which, to date, has proven reasonably accurate.
Listed below are a few of the past hits, so far no misses, that were listed on this site. Performance figures were calculated from the published date up until this article’s release date (30/03/11) with the exception of Implied Volatility Squared due to its focus on expiring options. All figures exclude any potential available leverage:
- Global FX calls:
the USD/CNY rate (167 basis point gain) and the USD versus basket as well (dollar Index SPOT gain of 137 basis points)
- VIX Contango Extraction:
the contango calendar spread would have produced, to date, 5.38 points or $5,380 variation margin per calendar spread. The trade has an opening economic exposure of $4,300, however, a fully hedged opening spread (zero net economic exposure) could have produced a net return of 5.408 points or $5,408 variation margin per calendar spread.
- Silver’s Back… -wardated, that is:
a late reminder over the good ol’ H1 trade there, from $32.296 to $36.96, a 14.4% gain or a $23,320.00 variation margin per CME contract.
- Converge like an Egyptian:
Convergence trade between the Egyptian ETF and the EGX30 benchmark (which is now re-opened and heading-up as per Vigilant Freedom). Convergence would have netted 15.65% on the EGPT:US leg and -4.38% on the EGX for a net, non FX-revalued, 11.27%. That being said, convergence-aside, I would strongly prefer going net-long on both legs from here.
- And The US Economy Is Doing Well:
with recent 2010 Q4 estimates revised upwards toward 3.1%, the US is now officially above the 2007 peak and heading higher, which is good news for everyone really.
- When Markets Present An Inefficiency, what do you do…:
So VIX’ own Implied Volatility curve was pricing too much vol in its high-strike range. In other words, the market was quoting an equilibrium price for implied-volatility over higher-strikes higher than it was for lower-strikes.
Technically this shouldn’t happen, but then it did.
VIX then hit its record high for the year or, in other words, it moved up to where the market was already pricing it to go to. So on the one hand there was an inefficiency and then the market moving back towards a new efficiency point, hmm….
Performance would strongly depend on your chosen options strategy and expiry month.
Just to illustrate, for the April 20 expiry contracts calls in the OTM strike range of 45, 47.5 and 50 that exhibited the most irregular implied-volatililty ‘smirking’: prices went from $0.10, $0,05 and $0.05 to $0.65, $0.55 and $0.25 respectively 550%, 1000% and 400% returns over the course of one business-week.
Okay, so this hindsight run is always nice to do from time-to-time. However, its the foresight that matters and again, it goes back to principle, without revenue this blog will have to stay calm and quiet for a while.
So What’s One’s Word Worth These Days?
Now, on more commercial matters, if anybody out there is interested in taking added market exposure, I am more than happy to oblige. Standard CPM/CPC commercial arrangements are available including third-party management through Google DoubleClick’s DFP platform. Please contact me at any time for further information.
If only I received a few dollars for every word I published since August of last year…