First of all, I recommend reading the CBOE whitepaper that I linked to in the post. Don't know your level of knowledge or interest, but it's worth the effort. Here's my TLDR: parallel shift is the extent to which the entire vol surface moves up or down, typically because of some change in overall expectation good (shift lower) or bad (shift higher). Sticky strike represents the change in VIX that would reasonably be expected given a change in SPX. Most of the time this would be SPX up/VIX down or SPX down/VIX up. Sticky strike can also vary between lower vol environments (less sensitive) and higher vol environments (more sensitive). I think the work done by the team at CBOE is really helpful at isolating the different puzzle pieces. Hope this is helpful.
Ah death knell the VIX alarm that does ring at the top, just like gold at the start of the year and oil briefly.
The dog that didn’t bark!
@jim could you elaborate on the parallel shift and sticky strike?
First of all, I recommend reading the CBOE whitepaper that I linked to in the post. Don't know your level of knowledge or interest, but it's worth the effort. Here's my TLDR: parallel shift is the extent to which the entire vol surface moves up or down, typically because of some change in overall expectation good (shift lower) or bad (shift higher). Sticky strike represents the change in VIX that would reasonably be expected given a change in SPX. Most of the time this would be SPX up/VIX down or SPX down/VIX up. Sticky strike can also vary between lower vol environments (less sensitive) and higher vol environments (more sensitive). I think the work done by the team at CBOE is really helpful at isolating the different puzzle pieces. Hope this is helpful.
Thanks Jim I appreciate the summary. I’ll do a deep this weekend into the white paper. 👊
You know you're a vol nerd when you're excited to check the decomp tool on a market up/vol up day. (I was)
Right?!!?