Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: Haim R. Branisteanu who wrote (38228)	9/14/2003 11:12:06 PM
From: gumnam	Read Replies (2) of 74559

Hi HRB 1) The realized volatility of EUR this year in any 1m or longer period is not higher than 11%. So there are plenty of volatility sellers at prices higher than that. Hedging Euro vol has been quite easy this year. A basic delta hedging strategy would have made you good money hedging Euro with a short gamma position this year. The realized vols of QQQ according to the ivolatility.com site has been around 20% over the last month and the implied vols are around 27%-28%. Equities tend to have much more of a gap risk ( called the fat tails or kurtosis) in technical papers. That is why the equity implied vols have such a premium over realized. QQQ since June has moved in a much wider range than UDX. It has gone from below 30 to 34.50 almost a 15% move. CUrrency markets are much more liquid, stable and efficient. Implied vols to realized vols are almost never very far off for any sustained period of time. I have rarely seen the two differ by more than 2% over any reasonable time in the last 6 years. Sometimes I think, buying currency options maybe a much cheaper and effective way to play currency trends. But I am like Jay - I hate paying for options. Gumnam

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