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3 Must-Know Ways to Judge Volatility

Before you put on your next option trade, ask yourself this question: How do I feel about the state of market volatility?

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Before you put on your next option trade, ask yourself this question: How do I feel about the state of market volatility?

Volatility is an important measure that can be confusing to new options traders. We’ve talked before about how every option trade is also making a prediction about volatility. Bearish on volatility? You want to be short options or spreads! Bullish on volatility? You want to be long options or spreads!

That sounds good on paper, but in practice, how can you actually tell whether volatility is high or low?

Here are three strategies to do just that.

1. Calculate the VIX

The CBOE Volatility Index, or the VIX, is one of the best tools that traders can use to judge macro volatility. In a nutshell, the VIX measures the expected size of the  (^IN) ’s price movement over the upcoming 30-day period.

Looking at a chart of the VIX, we can see that volatility has come down a bit today. But what does the number on the VIX actually represent? You can use a simple equation to answer that question:

The VIX / 16 = Expected daily percentage move in the S&P over the next 30 days.

Market Rebellion Co-Founder Pete Najarian breaks it down in this clip.

“The reality is this: At a 16 VIX, that means the S&P has to move 1% per day, every single day And so, “is that happening?” And then you get to 32 — okay, well now you gotta move 2% every single day.”

Using today’s  (^VIX)  as an example (according to the chart shown above), the calculation would be $28.08 / 16 = 1.755% expected daily percentage move in the S&P over the next 30 days.

So now you ask yourself the same question Pete was asking; “Is that happening?” Do you believe that S&P 500 is capable of making average moves that size over the next 30 days? Is this undershooting it? Overshooting it? Predicting future volatility is one way to make a judgment call on volatility.

But it isn’t the only way to judge the VIX. Instead of looking into the future, you can simply look in the rearview mirror…

2. Compare the VIX to its Historic Averages

Strip away what the VIX “means” and you’re left with a data set spanning decades. A data set that many have analyzed, putting together all kinds of averages. If you’re judging volatility on a short-medium term basis, you might find it helpful to know that the mean average VIX closing price in 2022 is $26.40, with a total range of $16.60-$36.45.

Curious about how that stacks up to the 5-year mean average? The mean average closing price for the VIX from January of 2018 through present day is $20.92, with a total range of $9.15 (Early 2018) through $82.69 (Peak Covid-19 panic — a multi-decade VIX record!)

You’ll notice we’re referencing the mean average — that’s the classic average where all of the values are added together and the sum is divided by the total number of values. But what about the median and mode?

A median average is determined by ordering all of the values in a data set from least to greatest and taking the exact middle value. This can be a powerful tool for dealing with extreme outliers. Though this data is about 8 years old (using values from January 2004 through January 2014), one might still find it interesting that the median VIX during this ten-year period was $17.1.

And what about the mode? A mode average is a measure of which value in a dataset showed up most frequently. In this case, the statistician rounded each closing VIX value to the nearest whole number, and got a mode of 13! The second highest was 12. This indicates that although the median and mean averages were higher, when volatility fell to the $12-$13 zone, it really hung out there for a while.

Using averages like these, you can make a raw conclusion about whether the VIX is currently above or below average!

The VIX is a macro indicator, but what about taking a more honed approach on judging volatility?

Ready to start trading? Try Unusual Option Activity Essential. Learn how you can follow the "smart money" with a fresh UOA trade idea each week - including technical levels so that you know where to enter and exit!

3. Measure Implied Volatility With IV Rank

For that, we look at IV rank. The IV here stands for implied volatility, which measures the option market’s expectation for upcoming moves in a specific assets price. IV is an important metric to keep an eye on for any option trader because IV directly relates to how much extrinsic value is priced-in to an option contract. However, comparing the IV of two different stocks is a lot like comparing apples and oranges. That’s why we use IV rank!

IV rank measures the current IV of at-the-money options in a security against its own IV over the past year, resulting in a percentage. Let’s look at this in practice for an example of why you can’t reasonably compare the IV of two different stocks without including IV rank in the calculation.

Let’s look at a comparison of Amazon (AMZN) - Get Amazon.com Inc. Report’s current 30-Day IV, and how it ranks against classic meme stock AMC’s IV.

Source: Market Chameleon
Source: Market Chameleon

Notice that Amazon’s 30-Day IV (its average IV reading over a 30-day period) is 51.6 — less than half that of AMC’s 115.8. So Amazon has lower volatility, right? On a literal basis, sure. But from the perspective of historical averages (using IV rank), Amazon’s IV is currently higher than it has been 96% of the past year. That’s pretty high. Comparatively, AMC’s IV rank is just 29% — meaning the IV has been higher 71% of the time over the past year!

With this data, you now have to make a judgment about whether that’s valid. Ask yourself, is there a good reason why Amazon’s volatility is so high? Do you expect it to continue charting a course higher? If so, you would want to use long option strategies to tackle this trade. On the other hand, if you think it’s more likely “overdone”, and that the IV is bound to fall over time, you’d want to consider short option strategies.

The Bottom Line: Keeping an eye on volatility while trading is like keeping an eye on your speedometer while driving. On its own, this measure isn’t enough to get you to your destination. But if you aren’t paying attention, you might be putting yourself in danger. On the other hand, mastering market volatility will help give your option trades an edge — and these three strategies are a great place to start. 

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International

Beloved mall retailer files Chapter 7 bankruptcy, will liquidate

The struggling chain has given up the fight and will close hundreds of stores around the world.

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It has been a brutal period for several popular retailers. The fallout from the covid pandemic and a challenging economic environment have pushed numerous chains into bankruptcy with Tuesday Morning, Christmas Tree Shops, and Bed Bath & Beyond all moving from Chapter 11 to Chapter 7 bankruptcy liquidation.

In all three of those cases, the companies faced clear financial pressures that led to inventory problems and vendors demanding faster, or even upfront payment. That creates a sort of inevitability.

Related: Beloved retailer finds life after bankruptcy, new famous owner

When a retailer faces financial pressure it sets off a cycle where vendors become wary of selling them items. That leads to barren shelves and no ability for the chain to sell its way out of its financial problems. 

Once that happens bankruptcy generally becomes the only option. Sometimes that means a Chapter 11 filing which gives the company a chance to negotiate with its creditors. In some cases, deals can be worked out where vendors extend longer terms or even forgive some debts, and banks offer an extension of loan terms.

In other cases, new funding can be secured which assuages vendor concerns or the company might be taken over by its vendors. Sometimes, as was the case with David's Bridal, a new owner steps in, adds new money, and makes deals with creditors in order to give the company a new lease on life.

It's rare that a retailer moves directly into Chapter 7 bankruptcy and decides to liquidate without trying to find a new source of funding.

Mall traffic has varied depending upon the type of mall.

Image source: Getty Images

The Body Shop has bad news for customers  

The Body Shop has been in a very public fight for survival. Fears began when the company closed half of its locations in the United Kingdom. That was followed by a bankruptcy-style filing in Canada and an abrupt closure of its U.S. stores on March 4.

"The Canadian subsidiary of the global beauty and cosmetics brand announced it has started restructuring proceedings by filing a Notice of Intention (NOI) to Make a Proposal pursuant to the Bankruptcy and Insolvency Act (Canada). In the same release, the company said that, as of March 1, 2024, The Body Shop US Limited has ceased operations," Chain Store Age reported.

A message on the company's U.S. website shared a simple message that does not appear to be the entire story.

"We're currently undergoing planned maintenance, but don't worry we're due to be back online soon."

That same message is still on the company's website, but a new filing makes it clear that the site is not down for maintenance, it's down for good.

The Body Shop files for Chapter 7 bankruptcy

While the future appeared bleak for The Body Shop, fans of the brand held out hope that a savior would step in. That's not going to be the case. 

The Body Shop filed for Chapter 7 bankruptcy in the United States.

"The US arm of the ethical cosmetics group has ceased trading at its 50 outlets. On Saturday (March 9), it filed for Chapter 7 insolvency, under which assets are sold off to clear debts, putting about 400 jobs at risk including those in a distribution center that still holds millions of dollars worth of stock," The Guardian reported.

After its closure in the United States, the survival of the brand remains very much in doubt. About half of the chain's stores in the United Kingdom remain open along with its Australian stores. 

The future of those stores remains very much in doubt and the chain has shared that it needs new funding in order for them to continue operating.

The Body Shop did not respond to a request for comment from TheStreet.   

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Government

Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…

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Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Government

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The…

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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