Playing the Short Side on SPX
Similar to my previous post on SPX Returns Conditioning on VIX, I’ve made a summary post for RUT conditioning on its CBOE volatility index, RVX. Given that RUT is a lot more volatile, the levels for RVX will be different from VIX, but still increasing by 5 points.
Essentially, my strategy would be to sell far OTM RUT puts weekly when RVX is low (below 20), monthly when RVX is intermediate (between 20 and 25), or quarterly when RVX is high (above 25). Again, these definitions of low, intermediate, and high were determined for myself by doing a simple percentile split for RVX levels from 2004 to date; the median RVX value has been around 21 to 22.
I’ve used RUT and RVX data from 01/02/2004 to 12/22/2016 to create the following summary tables for a rough guideline to which maturities I’d want to sell at and how far out of the money.
Weekly RUT Return Statistics Conditional on RVX
| Statistics | RVX Summary | RUT Returns: RVX < 20 | RUT Returns: 20 <= RVX < 25 | RUT Returns: 25 <= RVX < 30 | RUT Returns: RVX >= 30 |
| Total Occurrences | 675 | 247 | 194 | 105 | 129 |
| Mean | 25.09 | 0.04% | 0.11% | 0.16% | 0.84% |
| Std | 10.00 | 1.74% | 2.32% | 3.04% | 5.05% |
| Min | 14.74 | -5.86% | -6.92% | -10.89% | -13.85% |
| 25th Percentile | 18.73 | -1.08% | -1.41% | -2.38% | -2.17% |
| 50th Percentile | 21.99 | 0.18% | 0.19% | 0.61% | 0.73% |
| 75th Percentile | 27.78 | 1.28% | 1.81% | 2.49% | 4.13% |
| Max | 85.7 | 3.76% | 7.56% | 6.16% | 19.88% |
Probability Heat Map for Loss Thresholds and RVX Levels
Monthly SPX Return Statistics Conditional on RVX
| Statistics | RVX Summary | RUT Returns: RVX < 20 | RUT Returns: 20 <= RVX < 25 | RUT Returns: 25 <= RVX < 30 | RUT Returns: RVX >= 30 |
| Total Occurrences | 156 | 56 | 51 | 18 | 31 |
| Mean | 25.07 | 0.04% | 1.18% | -0.24% | 1.59% |
| Std | 9.72 | 3.53% | 4.49% | 5.47% | 9.56% |
| Min | 16.21 | -7.12% | -8.16% | -9.72% | -19.96% |
| 25th Percentile | 18.77 | -2.48% | -1.46% | -5.79% | -3.52% |
| 50th Percentile | 22.08 | 0.76% | 0.86% | 1.35% | 3.00% |
| 75th Percentile | 27.68 | 2.68% | 5.09% | 3.30% | 7.61% |
| Max | 77.81 | 7.19% | 12.26% | 8.08% | 21.59% |
Probability Heat Map for Loss Thresholds and RVX Levels
Quarterly SPX Return Statistics Conditional on RVX
| Statistics | RVX Summary | RUT Returns: RVX < 20 | RUT Returns: 20 <= RVX < 25 | RUT Returns: RVX >= 25 |
| Total Occurrences | 154 | 55 | 50 | 49 |
| Mean | 25.13 | 1.26% | 1.74% | 3.04% |
| Std | 9.77 | 6.37% | 7.53% | 13.19% |
| Min | 16.21 | -14.14% | -23.32% | -35.93% |
| 25th Percentile | 18.76 | -3.15% | -3.23% | -4.11% |
| 50th Percentile | 22.08 | 1.69% | 1.47% | 6.27% |
| 75th Percentile | 27.87 | 6.51% | 6.27% | 10.97% |
| Max | 77.81 | 11.85% | 16.03% | 36.37% |
Probability Heat Map for Loss Thresholds and RVX Levels
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