In recent years I often have heard the following questions: Are there other indexes that use the VIX® methodology to create implied volatility indexes for options on other asset classes and other stock indexes? How does the volatility of the S&P 500® Index compare to the volatility of other asset classes? The answer to question [...]
Some investors who are new to options have asked these questions: How can I determine how much premium will be generated by a covered call strategy? Is a high VIX level related to high option premiums? If VIX is at a high level, does that mean that a covered call strategy will perform well? Many [...]
Watch Part 1 of CBOE’s Fact & Fiction five part educational series, where Dominic Salvino of Group One Trading explains what the VIX measures and why it is often referred to as the “fear gauge”.
The last three months saw the VIX spot dropped quickly from 30-ish to 10-ish. No wonder XIV, the inverse ETN to the S&P 500 VIX Short-Term Futures Index, was among the top performing ETPs in January. Its return was 30.88% in January 2012 and 14.02% in December 2011. S&P Indices General Disclaimer XIV collects daily [...]
Today I’m going to discuss three prepacked investment solutions that seek positive exposure to the equity market with different volatility reduction approaches: S&P 500 Low Volatility Index: uses stock selection and alternative weighting to minimize portfolio volatility without the use of derivatives or active hedge. PowerShares has issued an ETF (ticker SPLV) that tracks this [...]
CBOE & Bloomberg present the 3rd Annual Equity Index Option and Volatility Symposium on quantitative strategies, market trends and the outlook for volatility in 2012. When: Wednesday, February 1, 2012, 3:00-7:00pm Where: Bloomberg. 731 Lexington Avenue, New York, NY 10022 To register email naseminar@bloomberg.net, with “2.1 CBOE” in the subject line or see “BU ” [...]
Watch this video to gain insight on how VIX expiration dates are determined and why they vary from month to month. Hosted by Michelle Kaufman.
Equity volatility, as replicated by widely traded ETFs and ETNs linked to the S&P 500® VIX® Futures Index Series, is frequently used to hedge equity portfolios. But is it appropriate for bond portfolios? The bond market is broad and diverse, ranging from low-risk government bonds to relatively high-risk high-yield corporate bonds and emerging market bonds. [...]
In Europe, ETFs and ETNs linked to the S&P 500 VIX Futures Indices and the VSTOXX Futures Indices collectively have nearly $380 million in assets ), as listed in Exhibit 1 (note: volume is the average daily volume in December 2011). Exhibit 1: Exchange Traded Volatility Products in Europe (Dec. 2011) Compared with the S&P [...]
Managing Brazilian Volatility with Futures and Options on the VXEWZ Index
Over the next five years, some projections indicate that the annual GDP of Brazil could surpass that of both France and the United Kingdom, and that Brazil could rise to become the fifth largest economy in the world.
More investors now are concerned with the issue of managing Brazilian volatility.
Today CBOE Holdings announced today that the following products will be launched in the coming weeks:
STOCK INDEX PRICES SINCE 2000
30-DAY HISTORIC VOLATILITY
Since February 2001, the average 30-day historic volatility has been about 25.6 for the MSCI Brazil Index and 18.9 for the S&P 500 Index.
30-DAY IMPLIED VOLATILITY
Some analysts prefer to look at real-time updates of implied volatility indexes that are designed to reflect intraday customer sentiment.
CBOE calculates and disseminates the CBOE Brazil ETF Volatility Index (ticker VXEWZ), which reflects the implied volatility of the EWZ ETF. www.cboe.com/vxewz
The price history for the VXEWZ Index begins in March 2011. The peak daily closing value for the VXEWZ Index was 63.49 on Oct. 3, 2011.
At mid-day today (Feb. 17), the VXEWZ Index was at 30.89 and the VIX was at 18.14.
Delayed quotes table is updated at http://www.cboe.com/micro/VIXETF/VXEWZ/
CORRELATIONS
As noted in the table below, the daily changes in the VXEWZ Index had a negative 0.85 correlation to those of the EWZ ETF during the time period covered.
TRADABILITY AND FUTURES AND OPTIONS
If you believe that the VXEWZ Index is mean-reverting, and you believe that there is a good chance that VXEWZ might rise significantly in upcoming weeks or months, four strategies that you might consider in the future include –
Before investing in any volatility-based product (futures, options, or ETP), please do your homework regarding the unique pricing of volatility-based products. You can visit http://www.cboe.com/micro/VIX/vixintro.aspx for some information regarding pricing, and http://www.cboe.com/micro/VIXETF/VXEWZ/ for more information on the VXEWZ Index.