First Day of IPO Listing: Wild & Spurious Volatility

IPO Listing day fluctuations are abnormal. As CNBC anchors term it there are lot of fun and games in these counters as there are no price bands on listing day.

1. Financial Express on Listing Day Volatility
2. Report on IPO listing day volatility in Business Standard
3. Prithvi Haldea of Prime database on Listing Day price bands.
4. SEBI's earlier proposal of 25% price band on first day of IPO Listing.
5. DNA on the Violence of Volatility of New Listings. One has to participate to experience the abrupt price fluctuations.
6. Will pre-opening trade help in case of IPOs Listing day fluctuations ?
7. IPO manipulation behind these violent moves ? Sucheta Dalal here
8. Research article on IPO pricing
9. Scholarly article on IPO pricing. Infact the vast amount of availability of academic literature makes the study of financial markets endlessly fascinating and intellectually satisfying. A motivated student of financial markets can grasp all aspects of an issue from various sources and form an informed opinion.
10. Another article by SSS Kumar who is an alumni of SVUSBM and a student of Dr M S REDDY who is my professor at Tirupati.
11. Information assymetry in IPO pricing may necessitate not applying price bands on Day 1.
12. Today( Oct 23,2011)'s new listing VASWANI has allegations of dummy IPO subscription.  
13. Related Article on  Vaswani
14. Always fascinating prose by Dr Ajay Shah on IPOs. He reminds me of Larry Harris of Trading & Exchanges. His articles on Indian Finance together with Dr Susan Thomas of IGIDR will be a GITA on Indian Finance & Markets. Infact Dr Susan Thomas web page contains lot of notes on Econometrics and Finance which is a feast for students of Finance and Financial econometrics.
15. Another respected thinker on Indian Finance even quoted in India's Financial Markets Book.
16. MoneyLife on IPO manipulation

VOLATILITY

Volatility or Vol as Market participants call it affectionately is the soul of Financial Markets. Recently I came across lot of resources on Volatility as my research also involves survey on Volatility.

1. Nobel Laureate Robert F Engle  on VOLATILITY. His FT Lectures here.
2. R F Engle's take on Financial Market Volatility on Youtube.
3. Interview with Engle by FX Diebold.
4. In fact I am greatly influenced by Dr K Kiran Kumar of NISM for introducing me and being a teacher of  Financial Econometrics at NISM in his EERF Summer Schools. Engle has actually participated in a conference at NISM two years back.
5. One book that is extremely lucid in explaining financial econometrics is  Chris Brooks.

MARKET QUALITY

My research topic revolves around assesing the impact of Microstructure innovations on Market quality at NSE.

1. I am proposing to examine the issue from three stand points
2. Market quality in terms of a) Informational Efficiency b) Market Volatility c) Market Integration
3. I want to examine how various metrics can be used as proxy for these measures.
4. Presently I am doing a survey of literature.

OPTIONS & VOLATILITY Resources

Some of the options & volatility resources that are of interest to traders and students are listed below.

1. Daily Options Report
2. Option Condors
3. DonFishback's update
4. Options for Rookies
5. Options Pundit

NEW & Refined FUTURES & OPTIONS Training JAN 8 - 9 , 2011

Futures & Options Made Easy (FOME 2011) is improved & refined in 2011 with lot of new additions very useful for students, traders and any one interested in the Derivatives Markets.

1. Option analysis software is being provided free .
2. Complete analysis of 22 option strategies of NSE OTS Module.
3. Lot of Examples are added to the course presentation
4. Complete market microstructure and market design is integrated.
5. Special topics on VOLATILITY and Statistical Concepts.
6. Real world trading approach and demonstration of trading and analysis software tools .
7. Sessions on Trading psychology & riskmanagement

Short cut to approximating IV,HV

Some of the benefits of sharing market information is the trainer achieves more clarity on specific concepts.

1. In delivering NSE program on derivatives , I came across a shortcut to approximating Implied Volatility(IV) and Historical Volatility(HV).
2. Normal approach to caluculating HV involves statistical caluculation.
3. Devangshu Datta of BS describes a thumb rule approach to estimating HV. It involves calculating the daily  HIGH - LOW range as a % of Futures settle price. You can take say, a 20-day moving average of this in order to get a smoother value. This can be used as a proxy for HV.
4. For estimating IV, We can take nearest to money call option and nearest to money put option premiums and calculate the breakevens to derive a range. For ex Nifty at 5280, 5300C (premium 100) and 5250 P (128) can be considered. A strangle breaks even outside 5558 -5022. This 536 points can be expressed as a percentage of NIFTY 5300 approx 10% as a estimate of IV. 
5. Black-Scholes options caluculator gives more precision but a thumbrule approx can be done as above

Trading the Earnings Season & FY 2009-10 Results

Always the results season offers good opportunities and volatility for the Intraday equities Trader.

1. I would like to be ready and prepared for this earnings season
2. Infosys results on April 13 before Market opening ( BMO). Early results are expected to be in-line as market is not showing any trembling. Surprises happen in the direction of Trend ?
3. Identifying stocks in play (SIP) as per SMB Training
4. Proper stock selection provides most of the edge in this season
5. Information regarding the exact timing of company announcements of their results is not available to me ?
6. How far the announcements are priced in the stock and expectations
7. Post earnings announcement drift( PEAD) is some thing traders have to be careful about.
8. Interesting post on playing the earnings season

Wonderful world of Econometrics

Financial Econometrics combines financial theory with econometric methods for forecasting.

1. The need for crunching huge data with availability of databases is bringing Financial Econometrics to the fore.


2. Some of the excellent authors in this field I came across are Chris Brooks, Tsay, Eric Zivot,Carol Alexander


3. I have yet to find an accesible book in the Indian Context with finacial data from Indian Exchanges. I hope NISM will bring out such a work. It could be good companion for their NSMD database. HF data analysis in the context of Indian Markets is a growing and important area.


4. High Frequency trading and Algorithmic Trading is adding to the requirement of familiarity with Financial Econometrics.


5. I think there are lot issues which traders implicitly assume needs to be empirically validated. Some of the examples are

Open Interest (OI) data in Futures as a predictor for nextday's Spot price

TEA near BSE

After NISM workshop is over myself and Mr Srinivasan, PhD Scholar with Pondichery University have gone to BSE.

1. Here I could feel the seductive nature of stockmarket as the participants gather watching around the ticker. This reminded me of the feelings expressed by Victor Niederhoffer on Visiting NYMEX floor.


2. Volatility of markets is a contributing feature to the seduction of stockmarket. Market will die if there is no volatility. I think many academic papers are starting to recognise and defferentiate between information induced volatility and spurious volatility.


3. We have visited major bookstores like Bookzone & Sterling book house & Strandbook stall near CST railway station.


4. We have spent time near Gateway of India and taken photographs at TajHotel.

Afraid to Trade Options

I had interacted today with many option traders who apparently know nothing about the concept of Volatility. I shiver at the description of their trading strategy confined to directional option bets. Disregard or lack of understanding for Time Decay or Implied Volatility.

1. Interesting post on Options


2. What are the parameters to look for in deciding whether option is attractively priced ?


3. Are we aware that Option is a non linear convex instrument unlike stocks or Futures ?