Ed Tilly, the Chief Executive Officer of CBOE Holdings Inc, announced the introduction of the CBOE S&P 500 Short-Term Volatility Index (Ticker – VXST) today at the CBOE Risk Management Conference in Portugal. The short term volatility index is a compliment to the industry standard CBOE Volatility Index (VIX). While VIX is a measure of thirty day implied volatility, the new short term volatility index will calculate nine day implied volatility. The VXST level is determined using the same industry standard methodology used to calculate VIX. However, the VXST calculation will focus on short dated SPX options contracts and will be the first volatility measure to take into account SPX Weeklys pricing.
CBOE has calculated closing prices for VXST going back to the first day of 2011 and plans call for sharing that data on the microsite in a next few days. Those interested in comparing nine day implied volatility to thirty day implied volatility of SPX options have almost three years of data to work with. This chart below shows the daily price changes for VXST from January 2011 through August 2013.
Note the highest and lowest levels for VXST are highlighted on the chart. The highest historical level for the short term volatility index was 68.00 on August 8, 2011 and the lowest closing price was 10.20 on August 2, 2013. This compares with a range of 11.30 to 48.00 for VIX over the same time period. There are times that VXST have been at a discount to VIX and there are periods of time where VXST has been at a premium to VIX. The chart below shows the price action for both VXST and VIX over the first eight months of 2013.
This final chart is a complete illustration of the spread between VXST and VIX covering the time frame from January 2011 to August 2013. The highest and lowest levels for this spread are highlighted on this chart. On August 8, 2011 when VXST was at 68.00 it was at a 20 point premium to VIX which closed at 48.00. On the other end of the spectrum on December 30, 2011 VXST was at a 4.04 point discount to VIX.