Tuesday, 8 October 2013 – Today the S&P/ASX 200 VIX® Index hit an intraday high of 16.778 (its highest value in 3 months) and closed at 16.325. The S&P/ASX 200 VIX is a real-time volatility index that provides insight into investor sentiment and expected levels of market volatility in Australia. The index tracks S&P/ASX 200 index option prices as a means of monitoring anticipated levels of near-term volatility in the Australian equity market.
Futures on Australia’s S&P/ASX 200 VIX Index are scheduled to be launched by ASX on Monday 21 October. S&P/ASX 200 VIX futures are designed to enable market participants to trade anticipated changes in Australian equity market volatility in a single transaction, and to more easily hedge, trade and arbitrage antcipated volatility in the Australian equity market.
As shown in the charts below, the all-time daily closing high for the S&P/ASX 200 VIX was 66.72 on 20 November 2008, and the S&P/ASX 200 VIX had a correlation of negative 0.65 versus the S&P/ASX 200 index, and negative 0.49 versus Hong Kong’s Hang Seng Index. Investors often explore the possibility as to whether volatility instruments could be used for diversification purposes.
RECORD VOLUME DAY TODAY. Worldwide interest in volatility-based investments has grown substantially since the launch of futures on the CBOE Volatility Index in 2004. Today CBOE reported that options on the CBOE Volatility Index (VIX) established an all-time, single-day volume record. Options volume totaled an estimated 1.78 million contracts, surpassing the previous record of 1,399,867, contracts traded on April 15, 2013.
WHITE PAPERS AND MORE INFORMATION
Here are links to two of the many papers on use of VIX-related instruments in portfolios — (1) BlackRock’s 2013 paper on VIX Your Portfolio – Selling Volatility to Improve Portfolio Performance, and (2) VIX Futures and Options: A Case Study on Portfolio Diversification During the 2008 Financial Crisis. published in The Journal of Alternative Investments.
Links for more information are at —
The VIX® — CBOE Volatility Index(R) methodology is the property of Chicago Board Options Exchange (‘CBOE’). CBOE has granted Standard & Poor’s Financial Services LLC (‘S&P’), a license to use such methodology to create the S&P/ASX 200 VIX Index. S&P has granted ASX Ltd a license to use and distribute the S&P/ASX 200 VIX Index, with the permission of CBOE.