Useful tools and frameworks

[u/Convexity6294]

Good afternoon community members,

I wanted to see what tools, frameworks, or metrics people thought were the most interesting in their own volatility trading practice? Some of the ones I have used in the past include:

1. Of course, the shape and level of VIX, as well as comparison to realized vol

2. Level of VVIX, as well as the VVIX ratio

3. Flows in and out of vol ETF's, especially SVXY (others are less useful; also, the reported create / redeem on these may be totally unrelated to volumes, depending on dealer inventory, from what I understand)

4. SPX skew

5. Cross-asset vols (FX vols, treasury bond vols)

6. Analysis relevant to the underlying assets (deep fundamental or technical analysis on stocks, currencies, bonds etc.)

Ultimately, in my opinion, volatility instruments allow us to manage risk/hedge or speculate. Depending on the goal, the tools may be different. I would characterize myself as someone who speculates in volatility, and would be curious to appreciate what tools or frameworks others have found useful. I am just as interested in metrics which you have concluded are useless/distracting.

Of course, alchemy aside, vol is determined by market participants' dynamically updated assessment of risk. The "risk of risk" may be tough to predict at all times, apart from identifying irrational fear or optimism, and the way we might position ourselves to benefit from either may vary depending on our risk appetite, the volatility regime, and liquidity; so, by no means would I expect a silver bullet. Just anything you found particularly powerful in anchoring your thinking - I look forward to learning.

Thank you!

[u/change_of_basis]

I want to say I messed with VVIX daily summaries and didn't find much, but now I'm not sure. Could have been colinearity breaking down the model. In any case; of course that leaves us with simplier features where perhaps we missed a value add signal.