MARCH 26, 2013 –Since the banking crisis in Cyprus began in mid-March, investors have asked – How nervous are the markets in Europe and worldwide? and – How can I manage my worldwide portfolio exposure?
Investors now have more tools to track and manage worldwide volatility and portfolio exposure. CBOE offers 20 indexes designed to provide real-time measures of implied volatility (see www.cboe.com/volatility), and a number of exchanges across the globe now are authorized offer licensed volatility indexes that utilize the popular VIX® methodology.
There is evidence to suggest that since mid-March implied volatility rose more in Europe than in other major financial markets. In the period from March 15 through today (March 26) the VSTOXX – EuroSTOXX 50 Volatility Index (VSTOXX) rose 32.7%, the CAC-40 Volatility Index (VCAC) rose 27.8%, the CBOE EuroCurrency Volatility Index (EVZ) rose 17.0%, while the CBOE Volatility Index® (VIX®) rose only 13.0%. See the chart and table below for more related info.
MANAGING GLOBAL EXPOSURE WITH CBOE OPTIONS
CBOE now offers dozens of options for investors who wish to manage their global equity exposure.
Below is a list of the CBOE options volume in February for select CBOE options.
A microwebsite with more information and more options is at www.cboe.com/global.
Strategies that could be considered to manage worldwide portfolios include —
- Buying Index Puts To Hedge the value of a portfolio.
- Buying Index Calls in anticipation of market advances.
- Buying Index Puts in anticipation of a market correction.
- Buying Index Straddles in anticipation of a major market move.
- Protective Index Collars with minimum net premium costs.