Volatility on Quadruple Witching Expiration Day

Volatility on Quadruple Witching Expiration Day

Quadruple Witching Expiration Week

image courtesy: http://www.stock-options-made-easy.com/quadruple-witching-expiration.html

Definition of ‘Quadruple Witching’ from Investopedia 

The expiration date of various stock index futures, stock index options, stock options and single stock futures. All stock options contracts expire on the third Friday of each month and once every quarter – on the third Friday of March, June, September and December – all four asset classes expire on the same day. Because futures and options investors must close out of their positions on those days, they often witness increased trading volume.
a popular belief is that during the quadruple witching expiration day there is  greater-than-normal market volatility.
lets have a look at the various volatility measures .
$SPY absolute change%  on Quadruple Witching Expiration Day 
  • the average absolute change% for all the days since Jan 2000 is 0.82% vs 0.75% on quad expiry days
  • lets define relative average absolute change as current day’s absolute change divided by average of prior 20 trading day’s absolute change, that measure for quadruple witching day stands at 0.88 , which essentially means these days are not as volatile as one would think.
  • of the 56 quadruple witching days , on 35 days ( 62.5%) the relative average absolute change% is less than 1 vs 21 days when the relative abs chg% is more than 1
  • lets define range% of $SPY as (high-low)*100(average(high,low) , the average range% for $SPY stands at 1.49% , vs 1.28% on quadruple witching days.
  • the average relative range% , which is current day’s range% divided by average of prior 20 days range % , on quad witch days stands at 0.87
  • of  the 56 quadruple witching days , on 40 days ( 71%) the relative relative range % is less than 1 vs 16 days when the relative relative range %  is more than 1 .

$VIX cash index  on Quadruple Witching Expiration Day 

the average change for $VIX stands at 0.19% (vs on quad witch days which is -1.65%

below the tale with all the above details for your own research , debunking myth of greater than normal volatile theory

Date Change% abs(chg%) abs(chg%)/avg(prior 20 days abs(chg%) Range% abs(rng%)/avg(prior 20 days rng%) VIX chg%
21-Mar-14 ?? ?? ?? ?? ?? ??
20-Dec-13 0.58 0.58 1.32 0.78 1.13 -2.54
20-Sep-13 -0.70 0.70 1.34 1.02 1.20 -0.30
21-Jun-13 0.32 0.32 0.36 1.44 1.09 -7.76
15-Mar-13 -0.14 0.14 0.24 0.47 0.52 0.00
21-Dec-12 -0.91 0.91 1.79 1.50 1.69 0.96
21-Sep-12 -0.04 0.04 0.09 0.59 0.77 -0.64
15-Jun-12 1.03 1.03 1.13 0.87 0.56 -2.63
16-Mar-12 0.14 0.14 0.27 0.34 0.43 -6.48
16-Dec-11 0.15 0.15 0.13 1.35 0.83 -3.27
16-Sep-11 0.60 0.60 0.37 1.36 0.50 -3.10
17-Jun-11 0.30 0.30 0.40 1.04 0.95 -3.87
18-Mar-11 0.37 0.37 0.40 1.08 0.79 -7.32
17-Dec-10 0.11 0.11 0.17 0.51 0.58 -7.36
17-Sep-10 0.04 0.04 0.04 0.86 0.68 1.34
18-Jun-10 0.12 0.12 0.08 0.67 0.32 -4.39
19-Mar-10 -0.50 0.50 1.22 1.52 1.70 2.11
18-Dec-09 0.56 0.56 0.86 0.93 0.82 -3.94
18-Sep-09 0.06 0.06 0.09 0.75 0.53 1.14
19-Jun-09 0.37 0.37 0.37 1.27 0.66 -6.79
20-Mar-09 -2.12 2.12 0.96 3.05 0.78 5.06
19-Dec-08 -0.43 0.43 0.13 2.83 0.57 -5.09
19-Sep-08 3.98 3.98 2.45 3.72 1.41 -3.11
20-Jun-08 -1.63 1.63 2.08 1.41 1.00 5.98
20-Mar-08 1.85 1.85 1.40 2.78 1.25 -10.79
21-Dec-07 1.44 1.44 1.27 0.89 0.57 -10.25
21-Sep-07 0.27 0.27 0.30 0.91 0.70 -7.09
15-Jun-07 0.57 0.57 0.92 0.47 0.51 2.20
16-Mar-07 -0.27 0.27 0.39 1.09 0.89 2.19
15-Dec-06 0.01 0.01 0.02 0.46 0.62 0.80
15-Sep-06 0.24 0.24 0.76 0.54 0.82 1.82
16-Jun-06 -0.73 0.73 0.84 0.88 0.62 8.49
17-Mar-06 0.09 0.09 0.20 0.40 0.48 1.17
16-Dec-05 -0.32 0.32 0.77 0.79 0.98 -0.47
16-Sep-05 0.71 0.71 1.59 0.70 0.84 -10.17
17-Jun-05 0.36 0.36 1.14 0.56 0.75 2.96
18-Mar-05 -0.29 0.29 0.48 1.17 1.23 -1.13
17-Dec-04 -0.66 0.66 1.79 0.67 0.79 -2.61
17-Sep-04 0.43 0.43 1.00 0.59 0.75 -2.50
18-Jun-04 0.19 0.19 0.36 0.92 1.01 -1.06
19-Mar-04 -1.43 1.43 2.29 1.37 1.18 3.35
19-Dec-03 -0.28 0.28 0.50 0.72 0.74 1.61
19-Sep-03 -0.51 0.51 0.87 1.16 0.99 -0.17
20-Jun-03 -0.22 0.22 0.27 1.09 0.70 -3.33
21-Mar-03 2.13 2.13 1.75 2.19 1.03 -5.81
20-Dec-02 1.43 1.43 1.27 1.03 0.58 -11.59
20-Sep-02 0.03 0.03 0.02 1.36 0.59 -4.11
21-Jun-02 -1.56 1.56 1.47 2.25 1.19 -0.91
15-Mar-02 0.96 0.96 1.04 0.91 0.58 -4.06
21-Dec-01 0.61 0.61 0.63 0.75 0.53 -4.94
21-Sep-01 -1.07 1.07 0.70 5.39 2.30 -2.47
15-Jun-01 0.16 0.16 0.19 1.65 1.18 -1.34
16-Mar-01 -2.00 2.00 1.44 2.23 1.03 4.73
15-Dec-00 -2.30 2.30 1.76 1.95 0.95 6.80
15-Sep-00 -2.19 2.19 4.10 1.53 1.48 1.42
16-Jun-00 -0.83 0.83 0.78 1.65 0.92 -0.87
17-Mar-00 0.67 0.67 0.48 1.74 0.71 7.70
avg 0.00 0.75 0.88 1.29 0.87 -1.65
med 0.10 0.50 0.77 1.03 0.79 -1.23

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When VIX rises by more than 10% on Tuesdays

When VIX rises by more than 10% on Tuesdays

with $VIX (Volatility S&P 500) rising 10.56% at the close as on 11 Jun 2013, here is how $SPY fared over the next day

here are the trading system rules we employed

  • $VIX rises by more than 10%
  • go long at close &
  • exit on the next trading day at close

below the backtest performance summary of  “go long on $SPY when $VIX rises by more than 10% in a day trading system” since 2000.

$VIX rises by more than 10% , Go Long on $SPY Trading System, backtest since 2000

Now applying the day of the week tweak , let us restrict to only Tuesdays

here are the trading system rules we employed

  • $VIX rises by more than 10% &
  • Today is Tuesday
  • go long at close &
  • exit on the next trading day at close

below the backtest performance summary of  “go long on $SPY on Tuesdays , when $VIX rises by more than 10% in a day trading system” since 2000.

$VIX rises by more than 10% , & today is Tuesday , go long on $SPY trading system, backtest since 2000

Yes ! that VIX rises by more than 10% in a day performs better on Tuesdays than any other week day.

Below the historical instances  (for your reference) of VIX rising more than 10% on Tuesdays and the next day change change% details of $SPY ,since Jan 2000.

Date VIX Change% $SPY Loss % $SPY Next day Change $SPY Next Day Change%
11-Jun-13 10.56 -1.03 ?? ??
23-Oct-12 13.30 -1.39 -0.39 -0.28
06-Mar-12 15.46 -1.46 0.92 0.70
01-Nov-11 16.05 -2.78 1.92 1.63
25-Oct-11 10.12 -1.94 1.21 1.02
15-Mar-11 15.10 -1.14 -2.27 -1.85
01-Mar-11 14.50 -1.67 0.27 0.22
22-Feb-11 26.60 -2.01 -0.77 -0.61
23-Nov-10 12.30 -1.45 1.66 1.48
16-Nov-10 11.78 -1.55 0.06 0.05
07-Sep-10 11.68 -1.13 0.73 0.71
29-Jun-10 17.69 -3.08 -0.94 -0.96
01-Jun-10 10.82 -1.68 2.63 2.60
04-May-10 18.08 -2.35 -0.65 -0.59
27-Apr-10 30.57 -2.36 0.84 0.75
01-Sep-09 12.07 -2.21 -0.35 -0.38
17-Feb-09 13.35 -4.28 -0.17 -0.23
20-Jan-09 22.86 -5.27 3.18 4.32
09-Sep-08 12.50 -2.97 0.46 0.41
22-Jan-08 14.09 -1.02 2.81 2.41
11-Dec-07 13.74 -2.74 1.29 0.98
28-Aug-07 15.76 -2.20 2.50 1.97
31-Jul-07 12.70 -1.13 0.63 0.49
24-Jul-07 10.35 -1.73 0.28 0.21
10-Jul-07 15.90 -1.42 0.94 0.70
26-Jun-07 13.45 -1.03 1.87 1.43
12-Jun-07 13.32 -1.09 1.97 1.50
13-Mar-07 29.59 -1.94 0.90 0.74
27-Feb-07 64.22 -3.90 1.25 1.02
13-Jun-06 13.60 -1.17 0.83 0.78
30-May-06 30.86 -1.78 1.22 1.12
27-Dec-05 12.66 -1.02 0.24 0.22
16-Aug-05 10.28 -1.31 0.00 0.00
22-Feb-05 17.53 -1.48 0.71 0.71
13-Apr-04 12.96 -1.40 0.15 0.16
03-Sep-02 22.46 -3.81 1.02 1.43
29-Jan-02 15.18 -3.15 1.28 1.44
03-Apr-01 11.25 -3.34 0.37 0.42
20-Feb-01 11.62 -1.54 -2.20 -2.16
02-Jan-01 11.69 -1.81 4.91 4.80
05-Sep-00 13.06 -0.81 -1.35 -1.13
02-May-00 10.12 -1.99 -2.66 -2.34
04-Apr-00 12.86 -0.74 -0.74 -0.63
07-Mar-00 13.07 -1.93 -0.13 -0.12
04-Jan-00 11.57 -3.91 0.20 0.18
avg 0.61 0.58
    median 0.67 0.60
    %up 70% 70%
    max 4.91 4.80
    min -2.66 -2.34

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how volatile the market is on Non Farm Payrolls Data Release Day ?

how volatile the market is on Non Farm Payrolls Data Day ?

With the Non Farm payrolls to be released before the market is open today,  by the US Department of Labor  which presents the number of people on the payrolls of all non-agricultural businesses. the general theory is the market can be extremely volatile.

We looked at how the Volatility S&P500 Index (VIX) moved on Non Farm Payrolls Data release day, since 2008.

Full day VIX Index  movement ( change from previous close to Non Farm Payrolls Data Release day’s close) since Jan 2008 , assuming one is holding on to VIX Longs.

  • Winners : 18
  • Losers : 46
  • % Winners : 28%
  • Average Change % : -0.88
  • Median Change % : -1.89
  • Maximum Gain % : 26.46
  • Maximum Loss % : -11.90
  • Average Gain %if Winner : 7.60
  • Average Loss % if Loser : -4.29
  • Average Gain % / Average Loss % : 1.77
  • Average Absolute Change% : 5.23

Despite the VIX Index moving more than 10% on five occasions ( on 01-Jun-12 , 09-Apr-12 , 04-Jun-10, 07-May-10 , 06-Jun-08) the average change for VIX Index for the full day on NFP Data Release day stands at -0.88% , with 72% ( 46/64) times VIX falling for the day.

Below the table with historical VIX price movements on Non Farm Payrolls Data Release Day since 2008

VIX full day Change, Change % , on Non Farm Payrolls data release day since 2008

the market is not as volatile as one might think on the Non Farm Payrolls Data Release days…

ps: on  6th Apr 2012 , and 2nd Apr 2010 , when NFP data is released , and when the markets are closed , the next market open day is considered for the VIX data change, change % details.

Historical VIX Price Movements on Fed Meeting 2007

Historical VIX Price Movements on Fed Meeting 2007

With the Federal Open Market Committee ( FOMO) set to announce the meeting minutes later in the day, below a look at the historical price movements of Volatility S&P500 Index (VIX)

Full day VIX Index  movement ( change from previous close to Fed meeting minutes announcement day’s close) since Jan 2007 , assuming one is holding on to Longs.

  • Winners : 16
  • Losers : 36
  • % Winners : 31%
  • Average Change % : -3.03
  • Median Change % : -3.48
  • Maximum Gain % : 15.10
  • Maximum Loss % : -26.96
  • Average Gain %if Winner : 5.58
  • Average Loss % if Loser : -6.86
  • Average Gain % / Average Loss % : 0.81
  • Average Absolute Change% : 6.12
  • Profit Factor : 0.37

VIX Index on average looses 3% on the fed meeting minutes days since 2007. who shorted the VIX Index ??

Below the table with historical VIX price movements on fed meeting minutes announcement day since 2007

VIX Index Historical Price Movements on Fed Meeting Minutes Date since 2007

 

When Both SPY and VIX Falls on a Friday , What Next ?

When Both SPY and VIX Falls on a Friday , What Next ?

Normally it is un-usual for both Volatility S&P 500 Index (VIX) and S&P 500 Index to fall , as they tend to move in opposite directions. Heading into the weekend (on Firday’s) this becomes more unusual. We have tested the following trading pattern with below defined trading strategy  rules to check if there exists a tradable-edge when both “S&P 500 Index ( SPY) and  Volatility S&P 500 (VIX) index falls on on a Friday.

Here are the trading strategy rules we used

  • Today is Friday  &
  • S&P 500 Index ( SPY) falls &
  • Volatility S&P 500 Index (VIX) falls as well

below the trading odds  for a 1 Day holding period for S&P 500 Index , since Jan 1990.

Next day S&P 500 Index Trading Odds , when both SPY and VIX falls on  a Friday since Jan 1990.
Total Instances 175
Average Change -0.17
Average Change % -0.01
Median Change 0.75
Median Change % 0.11
% Times up 54.9
Average if Win 7.52
Average % if Win 0.76
Average if Loss -9.51
Average% if Loss -0.96
Average Win / Average Loss 0.79
Average Win % /Average Loss % 0.80

no major trading edge right ? lets look at how VIX fares the next day.

Next day Volatility S&P 500 Index Trading Odds , when both SPY and VIX falls on  a Friday since Jan 1990.
Total Instances 175
Average Change 0.64
Average Change % 3.58
Median Change 0.36
Median Change % 2.20
% Times up 70.9%
Average if Win 1.17
Average % if Win 6.25
Average if Loss -0.65
Average% if Loss -2.98
Average Win / Average Loss 1.80
Average Win % /Average Loss % 2.10

VIX on an average ( for all the instances) rises by 3.58% , and rises about 71% of times the next trading day , when ever“both SPY and VIX falls on a Friday”

below the last 25 instances table for the readers to replicate the above trading strategy.

Both SPY and VIX falls on a Friday , last 25 instances

20 largest VIX spikes and next day VIX and S&P 500 Index returns

20 largest VIX spikes

with Volatility S&P 500 index ( VIX ) spiking by 43.2% at close as on 15 Apr 2013 , which is the fifth largest one day jump, we looked how VIX  index and the S&P 500 index fares the next day during the previous 20 largest one day jumps.

Below the table with 20 previous largest one day VIX spikes and the next day returns. As can be seen in the table below, VIX has fallen 75% (15/20) of the times next day , with the average fall standing at -6.06% , while the median fall stands at -8.86%. Also worth noting in those 20 largest falls , twice the volatility index followed with another 20% spike on 6th May 2010, and on 3rd Aug 1990.

20 Largest VIX spikes and subsequent VIX returns

20 Largest VIX Jumps since 1990

20 Largest VIX spikes and subsequent S&P 500 Index returns

Below the table with the next day S&P 500 Index returns. As can be seen in the table below, S&P 500 Index has risen 70% ( 14/20) of the times the next day, with the average gain standing at 9.2 points or 0.8%. The median next day change is 5.31 points or 0.63%. Do note that in those 20 largest VIX falls , twice S&P 500 index followed with another 1.5% ++ losses as on 6th May 2010, and on 3rd Aug 1990.

20 Largest VIX Jumps since 1990 and S&P 500 returns next day

h/t @ Ryan Detric and from the post here at stock twits : Today was the largest $VIX move ever (+43%) on an $SPY drop b/t -2.5% and -2.0%. Whoa; http://stks.co/jRYe

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