Trading the E-mini

tar said:
Why ? Friday's close was @ 11.30 , i think we will have a big jump today and tom ...
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Pace changed last night when Globex opened in the lower value area. Mkt will be trying to find value again now for the next few days. Vol is back because liquidity has dried up by comparisson to recent market state.
 
robster970 said:
Pace changed last night when Globex opened in the lower value area. Mkt will be trying to find value again now for the next few days. Vol is back because liquidity has dried up by comparisson to recent market state.
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Yes but my question was why : The VIX will take a few days to wake up to this fact ?

VIX now above 13 up around 15% from Friday's .
 
tar said:
Yes but my question was why : The VIX will take a few days to wake up to this fact ?

VIX now above 13 up around 15% from Friday's .
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Do you tar, I dont know. I just know that Vix often lags the actual vol demonstrated on ES....
 
DT said VIX is tied to options pricing, which I agree with. I find it weird to be tied to market thickness, though. I witnessed some of the highest volatility back in aug 2011 with the us downgrade, but I'd also never seen as many contracts per strike price on SPY. Average open interest at any time was something like 1mil+ at any level...
 
VielGeld said:
DT said VIX is tied to options pricing, which I agree with. I find it weird to be tied to market thickness, though. I witnessed some of the highest volatility back in aug 2011 with the us downgrade, but I'd also never seen as many contracts per strike price on SPY. Average open interest at any time was something like 1mil+ at any level...
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I don't think VIX is tied to market thickness personally.

Market thickness causes the markets to slow down because that's the liquidity that needs to be eaten for the market to move through any price. A knock on effect of that if it lasts is that the VIX will change.

My viewpoint is that the thickness is a more immediate indicator of what sort of day you are going to have and the approach you might want to take.

At the end of the day options prices & vix are mathematical formulae. Depth is actual traders willing to trade at prices. It's the latter that I try to have my mind on.

Not that I get it right all the time of course!
 
robster970 said:
Do you tar, I dont know. I just know that Vix often lags the actual vol demonstrated on ES....
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I don't think it lags , if it lags then there is a loophole in the system which can be exploited to make free money . Just my 2 cents .
 
Oh, I phrased it badly. The actual formula has nothing to do with # of contracts traded. I meant to say that I still find it counterintuitive that low volume in equities, but high volume in options can allow high volatility. It makes perfect sense if you see how it works, but it's still weird!
 
tar said:
I don't think it lags , if it lags then there is a loophole in the system which can be exploited to make free money . Just my 2 cents .
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I think that is exactly what good traders do.............
 
tar said:
I don't think it lags , if it lags then there is a loophole in the system which can be exploited to make free money . Just my 2 cents .
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To be clear - are you saying that depth is reduced/increased directly because of a changes in the VIX?

And that the reason this is true is that otherwise a free money trade would be available?
 
DionysusToast said:
To be clear - are you saying that depth is reduced/increased directly because of a changes in the VIX?

And that the reason this is true is that otherwise a free money trade would be available?
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It is all connected no logic answer to that so i will accept the egg and the chicken situation ...

"Free money" was aimed at the lagging comment .
 
^ Yes, great buying op. overnight as the Cyprus move lost momentum. Now it's mean-reverting and I'm totally kicking myself for not taking the trade. :cry: You don't need to have arbing supercomputers to take advantage of some of these moves...
 
tar said:
It is all connected no logic answer to that so i will accept the egg and the chicken situation ...

"Free money" was aimed at the lagging comment .
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Understood, sir!

robster970 said:
Of course it will, this is how the arb would work. A discrepancy and then an eventual closure of the opportunity as more people pile in...
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True dat- on a related note, does anyone know any arb traders?

I rather fancy they are dull, soulless characters - a bit like accountants but less exciting.
 
robster970 said:
Of course it will, this is how the arb would work. A discrepancy and then an eventual closure of the opportunity as more people pile in...
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Same concept that's what i was getting at , arbitrage = competitiveness , but i don't think this applies to us traders unless you have a super algo to take advantage of such discrepancy :)
 
tar said:
Same concept that's what i was getting at , arbitrage = competitiveness , but i don't think this applies to us traders unless you have a super algo to take advantage of such discrepancy :)
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Is this another example of you and simultaneously disagreeing and agreeing.....

Lol
 
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tar said:
Lol no , you are now talking about lagging for milliseconds = arbitrage opportunity which is not what i was talking about ...
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Right, so I have about 30mins tonight to cover this off.

I say that spotting a change in pace for the day on ES early is not reflected in Vix and presents a trading opportunity.

You disagree as you think that some form of arb would take place very quickly.

Let's look at some information then:

1) Both myself and Pedro asserted that the pace of the market changed at approx 11pm GMT last night when ES opened 7pts south of Friday's settlement price of 1553.50 for Jun '13. When I looked this morning, it was heading southbound.

2) Let's look here - IVolatility.com - Services & Tools -> Analysis Services -> Basic/Advanced Options -> Basic Options

The implied vol from Friday 15th for Calls was about 8.62% and Puts 9.19% for 1555 on SPX. If my calculations serve me correctly this puts 1 Standard Deviation at about 7.25pts. Vix was correspondingly loitering around the mammoth 11.20 level, derived broadly from these put/call implied vol levels

3) The low of today was 1529.50 by the looks of it or just over 3 x SD from Friday's settlement price. That's one fairly big move and one, of you were a canny trader you would have taken advantage of if sensing a change in pace.

4) Looking at Vix tonight, it has reacted with a close to the almighty 13.36 level - barely a ripple in 'fear index'

So where was the arb supercomputer when liquidity levels on ES dropped greatly to allow a 3SD price movement (and back) in a day? Vix was asleep because the people who buy Vix didn't think today's move was serious but it did provide a very lucrative trading opportunity for those who can spot this kind of anomaly. There were 2m contracts traded today vs 1.6m on sleepy friday and those that saw an opportunity to take advantage of a mispricing did....

arb shmarb

:p

<I thank you>
 
Incidentally tar, I calculate the SD of put/call implied vol levels daily to help me decide where I am going to trade. Often 1,2 & 3 SD in both directions from the settlement price correspond to major S/R, LVN's, etc.

Not always, mind, but enough for me to warrant paying attention to it.
 
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