Is Crude Oil More Volatile Than Stocks? Check Out the OVX Index

In recent years I often have heard the following questions:

  1. Are there other indexes that use the VIX® methodology to create implied volatility indexes for options on other asset classes and other stock indexes?
  2. 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.

The posts on this blog are opinions, not advice.
Please read our disclaimer for Indices.

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