A Devilish Question for Option Sellers: Which VRP Is Higher?
The article challenges the common view that options are systematically overpriced by examining the volatility risk premium (VRP) through the lens of implied versus realized volatility. Using 30‑day data on the high‑yield ETF HYG, it shows implied volatility consistently sits 40‑100% above trailing realized volatility, especially when realized volatility is low. The author argues that how VRP is measured—ratio versus spread—significantly alters its interpretation across assets. Ultimately, the piece warns option sellers to account for measurement nuances, liquidity differences, and market dynamics before harvesting the premium.
How to Get Arbed with Perfect Information
The piece uses Doug Costa’s coin‑flip contract example to illustrate the power of the no‑arbitrage axiom in derivative pricing. By calculating the no‑arbitrage price and delta hedge, it shows that even with perfect knowledge of true probabilities, a trader can...
A Market-Making Project You Can Do Today
The post outlines a hands‑on market‑making experiment using Polymarket’s crude‑oil binary contract and a tight 89.5/90.5 call spread priced with Black‑Scholes. By computing each instrument’s implied delta—how many probability points move per $1 change in CL—you can spot when the...
A Cleaner Way to Compute Seasonal Vol
The author introduces a calendar‑month realized volatility (CMRV) metric that computes monthly volatility by annualizing the square‑root of the mean squared daily log returns, eliminating the overlap inherent in a trailing 20‑day window. This approach prevents a large earnings‑driven move...
Does Revenue Seasonality Translate to Vol Seasonality?
H&R Block (HRB) saw its implied volatility surge to a one‑year high after market chatter about AI disruptions. The company’s low P/E ratio and 16% earnings yield give it bond‑like characteristics, prompting the author to sell cash‑secured puts instead of...
How a High Implied Vol Can Be Cheap
The South Korea ETF EWY sparked debate over whether its implied volatility (IV) was overpriced. Daily‑sampled realized volatility (RV) suggested the 50% IV looked rich, yet a 25% price gain in February annualizes to an 87% vol, more than double...
Options Policework
A Moontower Discord user reported a sharp price shock in the VanEck Uranium and Nuclear ETF on Jan 2, which led to a rapid loss in their options position. The trader suspects the loss was driven by gamma exposure as the...
The Bias of Hedging on Implied Delta
In this episode the host dives into the often‑overlooked importance of delta, arguing that "delta is god" and exploring how mis‑estimating implied volatility when delta‑hedging can bias P&L. Three lenses are offered: a pure quant perspective, a trader‑focused quant view,...
From Text ➡️ Dashboards
In this episode the host shares resources for both learners and active traders, highlighting the free CME Trading Simulator and educational posts on implied forwards and Jensen's inequality. The main focus is on using AI tools to transform textual insights...