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IV/RVX question

Discussion in 'Options' started by Brooks, Aug 10, 2016.

  1. Brooks

    Brooks Active Member

    Please see attached.
    Here are 2 examples of RUT shooting up 105 to 117 points over 73 days.
    In the first case the delta goes up 12.5 times. In the second case delta goes up only 1.6 times.
    In the first case MIV for the option goes up 1.7%. In the second case MIV drops 9.5%.
    The differences in delta are due to differences in MIV. And the differences in MIV for particular strikes are going to be reflective of the overall market IV.
    In the first case RVX 11/27/12 closed at 19.2 and on 2/8/13 it closed at 15.9, -3.3 lower.
    In the second case RVX 11/29/11 closed at 40.18 and on 2/10/12 it closed at 26.97, -13.21 lower.
    As RUT shoots up, RVX is going to come down. But it’s still not clear (to me) why on 100+ point up moves over two 73 day periods, one time RVX comes down 3.3 and another time 13.21.
    I suppose it could be because of the starting point. For the 3.3 drop RVX was starting at 19.2. For the 13.21 drop RVX was starting at 40.18. So the second time, RVX was higher to begin with, so it had farther to fall.
    Is that the explanation or are there other factors?
    Appreciate thoughts/insights ...
    Brooks
     

    Attached Files:

  2. AKJ

    AKJ Well-Known Member

    You said it! That's the reason.

    This is wrong. The difference in the delta has very little to do with IV of the options, and everything to do with spot RUT relative to the strikes.
     
  3. Brooks

    Brooks Active Member

    Thanks for your post Andrew.

    Brooks
     

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