Episode 16 of 'Saxo Options Talk': volatility unveiled - understanding market calm Episode 16 of 'Saxo Options Talk': volatility unveiled - understanding market calm Episode 16 of 'Saxo Options Talk': volatility unveiled - understanding market calm

Episode 16 of 'Saxo Options Talk': volatility unveiled - understanding market calm

Options 10 minutes to read
Koen Hoorelbeke

Options Strategist

Summary:  In Episode 16 of 'Saxo Options Talk,' Koen Hoorelbeke and Peter Siks delve into the complexities of market volatility, focusing on why the VIX is currently low and what that means for traders and investors. This episode offers a comprehensive exploration of volatility, its current levels, and strategic adjustments for managing options in a low-volatility environment.


Options are complex, high-risk products and require knowledge, investment experience and, in many applications, high risk acceptance. We recommend that before you invest in options, you inform yourself well about the operation and risks.

Introducing episode 16 - volatility unveiled: understanding market calm

"Episode 16 - volatility unveiled: understanding market calm" provides crucial insights into market volatility, particularly examining the current low levels of the VIX. Koen and Peter discuss the implications of this calm market and how traders can adapt their strategies to manage risk and optimize returns.

Important notice: this is a podcast recorded in mid April 2024. Current VIX/volatility levels are at the time of writing different (yet similar).

Volatility and the VIX explained

  • Current VIX level: The hosts highlight that the VIX is trading around 13-14, a moderate level compared to historical lows below 10 seen in 2017-2018.
  • Market dynamics: They explain the inverse relationship between market movements and volatility, noting that rising markets often lead to decreased volatility.

Impact of options selling strategies

  • Buy-write strategies: The episode covers the benefits of selling calls against ETFs to enhance yield, a tactic widely used by both large funds and individual investors.
  • Market maker dynamics: Learn how market makers stabilize volatility by maintaining delta-neutral positions, buying and selling shares as necessary to balance their portfolios.

Potential risks and market behavior

  • Mean reversion of volatility: Koen and Peter discuss how volatility tends to revert to its mean, indicating that the current low levels might not last.
  • Strategy adjustments for low volatility: They advise reducing the size of short volatility positions and using defined-risk strategies like spreads instead of naked options.

Professional vs. retail impact

  • Volatility management: Understand the different impacts that professionals and retail investors have on market volatility through their long and short positions in premium.
  • Risk mitigation: The episode emphasizes the importance of being cautious with short volatility strategies when the VIX is low and considering defined-risk approaches to mitigate potential losses.

Why listen to episode 16?

For traders and investors aiming to enhance their understanding of market volatility and its impact on options trading, Episode 16 of 'Saxo Options Talk' is a must-listen. It is packed with practical advice and expert insights to help manage risk in a low-volatility environment.

Subscribe and stay ahead

Ensure you don't miss this insightful episode by subscribing to 'Saxo Options Talk' on Podbean, or on Spotify. Keep yourself updated with the latest strategies and discussions in options trading.

Join the discussion

After tuning in, join me on my Threads profile to share your thoughts and insights on the episode. It's an excellent platform for engaging with fellow traders and enhancing our collective understanding of options strategies.

Your questions, our answers

We're eager to hear from you! Send your options-related questions to optionquestions@saxobank.com. Selected questions will be addressed in future episodes, providing customized advice and insights.

Conclusion:

"Episode 16 - volatility unveiled: understanding market calm" equips traders with the knowledge to navigate a low-volatility market effectively. Koen and Peter’s expert guidance sheds light on the intricacies of volatility, offering strategies to safeguard investments and capitalize on market opportunities. Tune in to transform your trading strategies and master the market’s volatility with confidence.

Previous episodes of the "Saxo Options Talk" podcast
Previous "Investing with options" articles
Previous "What are your options" articles
Other related articles
Why options strategies belong in every trader's toolbox
Understanding and calculating the expected move of a stock ETF index 
Understanding Delta - a key guide for Investors and Traders
Trading 0DTEs - get your feet wet - without drowning

Options are complex, high-risk products and require knowledge, investment experience and, in many applications, high risk acceptance. We recommend that before you invest in options, you inform yourself well about the operation and risks. In Saxo Bank's Terms of Use you will find more information on this in the Important Information Options, Futures, Margin and Deficit Procedure. You can also consult the Essential Information Document of the option you want to invest in on Saxo Bank's website. 

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