Cheap Volatility: A Lesson In Market Structure Mechanics

"The world breaks everyone, and afterward, some are strong at the broken places." - Ernest Hemingway   Alphacution has always been fascinated by the players. Unlike the world of sport, market players have unique potential to influence the field of play, and thus create a feedback loop that influences other players, and so on causing market ecosystem evolution. In this game, the rulemakers and overseers - the referees - are typically playing catch up... This is not to suggest that markets don't have naturally occurring limits in addition to those that are imposed by referees. They do. There are always capacity constraints, given performance requirements and performance expectations; and so, we are further fascinated by how players navigate - how they survive, thrive and scale (or not) - relative to the inevitability of market limitations, many of which are currently not well understood. Throughout these digital pages, Alphacution has plotted a journey to fill this unmet need for understanding -  presenting the output of our fascinations - the stories of [...]

By |2020-10-05T16:03:25-04:00May 1st, 2020|Open|

Ports in the Storm: US Options Exchange Rankings

 “It’s not bragging if you can back it up.” – Muhammad Ali   While so many seem to be pleasuring themselves with the Tiger King, some of us continue to geek out with the latest data. Now, with March so freshly in the review mirror, certain monthly and quarterly data updates are going to be among our first chances to benchmark the significance of what has just happened in capital markets. We started with a focused comparison of the volatility patterns of the GFC period to the unfolding CVP period here and here, and then detailed the first trading casualties of that volatility here, here and here. Below, is our latest visual of that volatility comparison, where we are beginning to break down the components of volatility represented by the gap and range... Among the more fascinating aspects of this perspective is the illustration that there have been 8 volatility spikes with intraday ranges greater than 20 VIX points since January 2008, and the greatest of these occurred on February [...]

By |2020-10-05T16:10:56-04:00April 2nd, 2020|For Subscribers|

Marketquake: The Volatility of Volatility

“To develop a complete mind: Study the art of science; study the science of art. Learn how to see. Realize that everything connects to everything else” – Leonardo da Vinci If there was ever a moment in time when we realized just how much everything connects to everything else - a quote (and concept) I have been using to repeatedly bludgeon you lo these many past months - now would be that moment. However, so as not to jump on the singularly overcrowded bandwagon of doom that is the current events flow of content (for now), I'd like to walk through a storyboard of related significance. That sadly familiar aroma in the air is fear; a specific vintage of which has not washed over the market ecosystem since 2008. Many are coming to the conclusion that if the virus doesn't take us down, the arsenal of preventative measures just might - and therefore, one way or another, we are likely entering a period of financial stress (to put it as [...]

By |2020-10-14T22:24:36-04:00March 19th, 2020|Open|