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 number 1 above is that there now are dozens of indexes worldwide that are legally authorized to use the proprietary VIX methodology (for a sampling of some volatility indexes created by CBOE, including the CBOE Crude Oil ETF Volatility Index (OVX), please visit www.cboe.com/volatility).
An answer to question number 2 above is that crude oil prices often have been much more volatile than the S&P 500 Index.
30-DAY HISTORIC VOLATILITY
The 30-day historic volatility for crude oil peaked at over 125 in January 2009, but it has fallen to around 20 this month.
Here is the average 30-day historic volatility since January 1993 for three key barometers —
- 36.5 Crude oil spot (WTI)
- 17.0 S&P 500 Index
- 14.9 Gold spot
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.
The CBOE Crude Oil ETF Volatility Index (OVX) has a price history back to May 2007, and its peak daily close was 100.42 on December 11, 2008. The OVX Index is designed to reflect the 30-day implied volatility of USO ETF options www.cboe.com/OVX
The average daily closing values from May 10, 2007 through February 14, 2012 were –
- 41.9 CBOE Crude Oil ETF Volatility Index (OVX)
- 26.5 CBOE Volatility Index (VIX)
There were three days in August 2011 in which the USO ETF fell by more than 6% and the OVX Index rose by more than 26%.
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 www.cboe.com/VIX for some information regarding pricing, and www.cboe.com/OVX for more information on the OVX Index.
For a more-detailed, longer version of this blog with ten charts, please click here.