Mid-Year Recap – Vol-selling Indexes Up; Big Jump for VIX and VVIX on June 29 – By Matt Moran

A recent Bloomberg story noted —

“The S&P 500 drifted to an all-time high on May 21, before the Greece crisis overshadowed signs that a first-quarter slowdown in economic growth would prove transitory. The benchmark index tumbled 2.1 percent Monday, the most since April 2014 and erasing gains for the year, as Greece surprised investors by shutting lenders and imposing capital controls after debt negotiations broke down.”

Below are four key points regarding volatility and options-based indexes.

The first chart below shows the percentage change for the 1st half of 2015 for 8 CBOE performance benchmark indexes and the CBOE Volatility Index® (VIX®). Two benchmark indexes that sell one-month VIX futures – VPD and VPN – both rose more than 7%, while two benchmark indexes that sell at-the-money one-month S&P 500® (SPX) index options – BXM and PUT – both rose by more than 3%.

1- Benchmrks 1st half

The index with the highest returns for the first half was the CBOE VIX Premium Strategy Index (VPD); this index tracks the value of a portfolio that overlays a sequence of short one-month VIX futures on a money market account. The VIX futures are held until expiration and new VIX futures are then sold. The money market account decreases leverage relative to a stand-alone short position in VIX futures. To further limit risk, the number of VIX futures sold at each roll is set to preserve 75% of the initial value of the portfolio in the event that VIX futures increase by 25 points. To learn more about CBOE’s benchmark indexes (which could be appealing in times of low interest rates and high p/e ratios), please visit www.cboe.com/benchmarks.

On Monday, June 29, after the markets absorbed news regarding the closing of banks in Greece, (1) the CBOE VIX of VIX Index (ticker VVIX) rose 40.8%, and (2) the VIX Index rose 34.5%, its biggest one-day move (in percentage terms) in more than two years.

2 - table big VIX moves

Investors often inquire as to whether the VIX Index recently has been relatively low or high. In the first half of 2015, the average daily close for the VIX Index was 15.1, which was higher than its 14.2 average for each of the last two calendar years, but was much lower than the average in 2008 and 2009. In viewing the chart below it is interesting to ask whether the VIX price levels move in cycles and if the VIX may begin to trend upward the next few years. www.cboe.com/VIX.

2-VIX avg per year

For investors who wishing to gain a better idea of the relative costs of hedging with SPX protective puts and VIX calls, three key CBOE indexes to watch are the SKEW, VVIX, and VIX indexes. CBOE SKEW Index values, which are calculated from weighted strips of out-of-the-money S&P 500 options, rise to higher levels as investors become more fearful of a “black swan” event — an unexpected event of large magnitude and consequence. The value of SKEW increases with the expected tail risk of S&P 500 returns. If there were no tail risk expectations, SKEW would be equal to 100. Historically, SKEW has varied in a range of 100 to 147 around an average value of 115. So far in 2015 the average value of the CBOE SKEW Index has been 124.6, indicating that there is some strong interest in tail risk protection.



To learn more about the above indexes and download data and white papers, please visit www.cboe.com/benchmarks and www.cboe.com/volatility.

On Sunday Night VIX Futures Volume Topped 26,600, as VIX Futures Rose 10.8% – By Matt Moran

       Managing Volatility Around-the-Clock SUNDAY, JULY 28 AT 11 PM CT – Tonight the VIX futures estimated volume topped 26,600 contracts, and the VIX nearby (July) futures rose 10.8% in the time period from 5 p.m. to around 10:30 p.m. Chicago time. News stories tonight indicated that the Euro, many Asian stock indexes, and U.S. […]

The Greece Crisis is Not Our Concern, Say US Options Investors

English speakers have grown to love the German word schadenfreude. But what’s the single word for indifference to the suffering of others? We need to figure this out to describe what’s happening in the US options markets. For the past decade, European and US options investors have been sympathetic to each other’s pains. When we […]

Record Volume Today in ETH Session for VIX Options – By Matt Moran

June 16, 2015 – Yesterday the CBOE Volatility Index® (VIX®) rose to its monthly closing high of 15.39, and earlier today in the June 16 Extended Trading Hours (ETH) sessions, the estimated trading volumes during ETH were 30,920 for VIX futures (the high for the month), and 6,984 for VIX options (the all-time record high). […]

Last Week in VIX – 5/31/2015

The S&P 500 drop, which can be mostly attributed to market action on Friday, resulted in VIX putting up a pretty bullish week. Everyone is aware that we had a short week last week and VIX traders know this can cause a little disorientation when looking at VIX relative to the futures pricing. The curve […]

Last Week in Volatility Indexes and ETPs – 5/31/2015

Short term volatility rose last week based on stock market action and some impact from the holiday weekend. VXST’s 42% rise is partially attributed to the three day weekend being behind us and we can probably give a little credit to the day off Monday for the 14% rise in VIX. The issue that has nothing to do […]

Last Week in VIX – 5/24/2015

The VIX futures curve was lower last week with June losing more than the index or other futures as it was awarded the official title of “Front Month” with May VIX futures and options settling on the open Wednesday. Below I’ve changed things up a bit and the comparison is a year over year look […]

Last Week in Volatility Indexes and ETPs – 5/24/2015

The S&P 500 moved up a little last week and the volatility curve moved lower. On the shorter dated end of the volatility term structure chart, there was the three day weekend effect which helped push VXST and VIX a tad bit lower than would be expected in front of a normal two day weekend. […]

Last Week in VIX – 5/17/2015

There was a fairly parallel shift lower in spot VIX and VIX futures pricing as there wasn’t much to get excited about last week. The May VIX future dropped a little more than the spot index as expiration is just around the corner. Despite the almost 5% drop in the May contract, the premium relative to spot VIX […]

Last Week in Volatility Indexes and ETPs – 5/17/2015

There was a slight shift in the VXST – VIX – VXV – VXMT term structure last week. VXST and VIX were down, VXV was actually up slightly and VXMT dropped. Relative to history, VXV and VXMT are higher than you would expect with the S&P 500 making all-time highs. I’m convinced the market is […]


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