May 16, 2016

Global Sigma Interview

Short interview with Hanming Rao, founder of Global Sigma Group, one of the more successful volatility programs.

Since its inception in 2009, Global Sigma Plus Program realized 14% annual returns, with shape of 2.5+. More recently they started AGSF program in 2013, with similar returns, with sharpe of 1.6, and BondVOL program that started just a year ago.

Dr Rao highlights risks and opportunities in short-term options, and his approach to trading, where he tries to predict both short-term movement and volatility. I want to add that in my opinion systematic trading of weekly options is not for amateurs. Gamma risks are very significant, and even highly experienced trader like Dr Rao stumbled last year on volatility spikes.


May 11, 2016

FTSE 100 Weekly Options

LSE is launching weekly options on FTSE 100 index at the end of this month - May 31st. This brings the number of ex-US indexes with weekly options to 9.


Complete list:
1 SXE5 (Eurostoxx)
2 CAC
3 DAX
4 FTSEMIB
5 AEX
6 OMX
7 Nikkei
8 TWSE (Taiwan)
9 FTSE 100

H/t to Amsterdam Trader, excellent blog that covers news and developments in derivatives.

May 9, 2016

Russian Volatility Index

Moscow Exchange (after merger with RTS) has updated the methodology behind the benchmark index of Russian volatility. The new index is called RVI (RVI$ Index on Bloomberg) and is calculated using the same methodology as the VIX. Differences between the old and new index are explained on the exchange pages.

Index main. Methodology.

Sadly, there is no liquidity in the futures. I checked just a minute ago - only June expiration listed, volume 1 contract, open interest 2 contracts. May contract expired with open interest of only 136 contracts.

The index provides an interesting view of country-specific volatility during a time of a major warfare. The index' average level is about 30, about the same as the previous RTSVX index.

After Pro-Russian military forces seized control of Ukrainian Crimean peninsula, RVI did not react in a significant way. However the index spiked early in March 2014, probably after G8 members suspended preparations for the Sochi Summit. It seems that the market anticipated sanctions; but after spiking to 50s, index discounted the impact on economy and fell to 30s.

The currency market led the reaction to US and EU led sanctions on Russian attack on eastern Ukraine. In mid-december RVI spiked up again, to almost 100, mostly due to decline of Ruble, and actions of the Russian central bank.

At the time of writing is seems that even despite the war, despite all the sanctions, despite the decline in oil prices the index has stabilized at around 35 level - slightly elevated, but not a crisis level. RTSI Index is around multi-year lows, but after falling about 30% in December of 2014 has remained at around the same 800-900 level.

Thank you very much to reader Oleg P. who emailed me regarding the updated methodology.

Apr 11, 2016

International Indexes With Weekly Options

Right now there are few exchanges that offer weekly index options outside the US:

1 SXE5 (Eurostoxx)
2 CAC
3 DAX
4 FTSEMIB
5 AEX
6 OMX
7 Nikkei
8 TWSE (Taiwan)

Please email if I missed anything, or if there are any updates to this list.