VXAZN Index Fell a Record 37.5% Today

Jan. 30, 2013 – Today the CBOE Equity VIX® on Amazon (VXAZN) fell 37.5% – a record one-day fall in percentage terms for the index.  VXAZN is designed to measure the expected volatility of Amazon.com (AMZN) stock.   The data history for the VXAZN Index goes back to June 2010. A link to spreadsheets is at www.cboe.com/VXAZN

DAYS WITH BIGGEST % CHANGES

Below are the six days in which the VXAZN Index had changes (up or down) of more than 27%; it is interesting to note that all five of the down days were the day after AMZN earnings announcements.

  • 30-Jan-2013                      -37.5%
  • 26-Oct-2012                      -36.1%
  • 1-Feb-2012                       -36.0%
  • 27-Jul-2012                       -31.3%
  • 27-Apr-2012                      -27.0%
  • 26-Dec-2012                     32.0%

HISTORICAL PRICE CHARTS FOR VXAZN INDEX

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IMPLIED VOLATILITY AND NEWS ANNOUNCEMENTS

The abstract for a 1996 academic article noted that —

“We study the implied volatility behavior of call options around scheduled news announcement days. Implied volatilities increase significantly during the pre-event period and reach a maximum on the eve of the news announcement. After the news release, implied volatility drops sharply and gradually moves back to its long-run level. Only on the event date are movements in the price of the underlying significantly larger than expected. These results confirm the theoretical results of Merton (1973).”

The Impact of Firm Specific News on Implied Volatilities, by Monique W.M. Dondersa and Ton C.F. Vorst.  Journal of Banking & Finance, (November 1996), Pages 1447–1461.

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OPTIONS STRATEGIES

For more information on options strategies that could be considered as implied volatility is changing, please visit http://www.cboe.com/Strategies

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

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