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How Options Markets During the Short Vol Crash of 2/5/18 Stack Up Against the Flash Crash of 8/24/15.

Posted by ORATS Team on 2/15/18 9:57 AM

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The options markets deteriorated during the 2/5/18 crash with markets widening and posted size on the markets falling and cost options traders plenty.

It is helpful to give some context to the amount of deterioration that would be expected based on a comparison to the last similar event, the Flash Crash of 8/24/15.

Both days the SPY was down about the same amount 4.1% 8/24/15 & 4.2% on 2/5/2018. The ORATS one day volatility was similar 55% in 2015 and 60% in 2018. (Note that typical measures of volatility like close-to-close do not measure one day volatility but ORATS has designed one that does.)

The options markets deteriorated MORE in 2018 than in 2015 on the event days:

  • In the flash crash of 2015 the width went from 10.1% to 15.0% (up 48%) and in 2018 the width went from 8.2% to 16.6% (up 102%).
  • In 2015 the size on the bid & ask went from 337 to 276 (down 18%) and in 2018 size went from 138 to 100 (down 28%)

The fragility in the options market can be attributed to the falling number of market makers and other posted liquidity providers.

 

ORATS Team

Written by ORATS Team

ORATS is a premier options analytics vendor committed to uncovering untapped alpha-generating solutions. ORATS utilizes an advanced, proprietary volatility analysis to produce implied, forecast, and historical volatilities that have been proven to be more accurate market summarizations than those obtained from most commonly available sources.

Topics: Markets, Volatility

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