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varclock

The option market's day-by-day variance calendar.

Python library and CLI · Python, NumPy, SciPy, rich · MIT · v0.1.0 · github.com/Thesimpleex/varclock

Abstract

Reads from one S&P 500 option-chain snapshot how much volatility the market prices for every trading day, scheduled event and weekend ahead. For volatility traders, derivatives quants and risk managers.

Forward volatility per trading session with CPI, FOMC and election sessions highlighted
Figure 1. Forward volatility per trading session with CPI, FOMC and election sessions highlighted.

1Motivation

Volatility is not spread evenly over the calendar: weekends carry little, FOMC, CPI and election days carry a lot. Desks track this in spreadsheets; with daily SPX expirations the whole calendar can now be read model-free from one snapshot.

2Method

  1. Model-free variance per expiry following the published Cboe volatility-index methodology, tested against Cboe's worked example and official closes.
  2. Forward variance between adjacent daily expirations, with arbitrage checks.
  3. Fit a smooth base curve plus event bumps and a weekend weight with bootstrap intervals.
  4. Compare implied with realised moves on past CPI, FOMC and jobs-report days.

3Results

Event multiples under a mean-reverting base and under a penalised spline
Figure 2. Event multiples under a mean-reverting base and under a penalised spline.
Realised versus implied moves on CPI, FOMC and employment-report days since May 2022
Figure 3. Realised versus implied moves on CPI, FOMC and employment-report days since May 2022.
Rebuilt minus official close for four volatility indices and two data adapters
Figure 4. Rebuilt minus official close for four volatility indices and two data adapters.
Terminal output of varclock replicate
Figure 5. Terminal output of varclock replicate.
Self-contained HTML variance calendar report
Figure 6. Self-contained HTML variance calendar report.
Terminal output of varclock bounds
Figure 7. Terminal output of varclock bounds.

4Usage

4.1 Variance calendar

Forward volatility per session with intervals and event labels.

varclock calendar SPX

4.2 Replicate the indices

Rebuilds the official volatility indices from the same quotes.

varclock replicate SPX --source yahoo --source cboe

5Installation

pip install "varclock[yahoo,plot] @ git+https://github.com/Thesimpleex/varclock"

Python 3.11 or later. Not on PyPI; installs from GitHub.

6Specification

Runs
Python 3.11+, CLI
Built with
Python, NumPy, SciPy, rich
License
MIT
Version
0.1.0

Source code, issues and releases: github.com/Thesimpleex/varclock. License: MIT.