Dec. 26, 2013 — Over the next week many investors will read year-end wrap-ups noting that some U.S. stock indexes recently hit all-time highs and have risen more than 30% in 2013. This blog provides a year-to-date update on a number of other indexes and commodities that also are used in diversification and portfolio management strategies.
As shown in Figures 1 and 5 below, many volatility indexes have dropped this year as stock prices and oil prices have risen. The popular CBOE Volatility Index® VIX® is down 31.6%. On other hand, the gold spot price is down around 27.7%, and the CBOE Gold Volatility Index (GVZ) is up 38% (see Figures 1, 2, and 5).
Figure 2 shows the daily closing values for the GVZ, OVX and VIX indexes, and also shows the daily volume for VIX futures. On April 15, 2013, the CBOE Gold Volatility Index (GVZ) had an all-time one-day % record up move of 61.7% www.cboe.com/GVZ
Figure 3 shows a number of total return benchmark indexes that use VIX futures or VIX options in their performance. Note that there is a wide variety in the performance numbers for 2013, as these indexes engage in many different strategies.
Many investors now are searching for yield-based investments, and Figure 4 provides a comparison of two bond indexes and three options indexes that write S&P options to gain options premium income.
A recent story in the Financial Times entitled “US bond outlook clouded by taper” noted that —
“After enduring their first negative year in more than a decade, US bond investors face further challenges in 2014 as the Federal Reserve starts retreating from its era of easy money. The Barclays US Aggregate bond index … is set to record its first negative year of total returns since 1999 … “
After a three-decade bull market in bonds, many yield-oriented investors are concerned about low interest rates, and they are exploring the VIX and option-writing strategies with the goal of boosting yield and risk-adjusted returns.
Please visit www.cboe.com/benchmarks for more information on benchmark indexes and links to white papers. Please read closely the applicable prospectus and risk disclosures before investing.