BetterBeta's  Instablog

Send Message
As the founder of BetterBeta Trading, I bring an independent option trader's perspective to successfully trading iron condor options strategies, focused primarily on the Russell 2000. Reducing volatility and hedging against outlier risks while generating steady profits are the building blocks of... More
My company:
BetterBeta Trading
My blog:
BetterBeta Trading
  • Vanishing Volatility 0 comments
    Jan 24, 2013 3:14 PM

    As iron condor traders (with short vega), we obsess over volatility, both historical and implied. To put the current volatility in the proper context, we frequently measure the current implied volatility relative to the 30 day implied volatility range. This helps us to structure favorable trades that put volatility trends on our side.

    During sustained market rallies like the one we are currently experiencing, implied volatility drops significantly. When we ran our usual implied volatility screen against the top 38 indices/ETFs by option volume, the levels (or lack thereof) of implied volatility were quite telling.

    Implied volatility ranges

    Nearly all of the indices/ETFs, regardless of their correlations to the broader market, are experiencing very low implied volatilities (aka cheap options) relative to their 30 day implied volatility range.

    The major ETFs such as QQQ, SPY, DIA and USO all have 30 day implied volatility range readings below 1%. These ETFs also have 30 day implied volatility averages that are less than their 30 day historical volatility averages.

    While we don't pick market tops or bottom, the mean reverting nature of volatility tells us that vols may not go much lower. And an uptick in volatility, both implied and realized, means better opportunities for iron condor traders.

Back To BetterBeta's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers


More »
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.