JAN. 1, 2014 – While many stock indexes rose substantially in the year 2013, gold spot prices and the SPDR Gold Shares ETF (GLD) both fell 28% in the year, and the CBOE Gold ETF Volatility Index (ticker GVZ) rose 50.6%.
Viewing the chart above, the two biggest one-day moves in the year for the GVZ Index were on back-to-back trading days in mid-April. On Friday, April 12, the GLD ETF fell 4.7% and the GVZ rose 39.4%. On Monday, April 15, the GLD ETF fell another 8.8%, and the GVZ Index rose another 61.7% (the biggest one-day move ever for the index).
The price movements of the GVZ in 2013 (and particularly in mid-April) show that volatility indexes could be explored for their potential as diversification tools. Two of the simpler strategies are long futures and long call options on the volatility index, but before investing please do your homework regarding the fact that the volatility index futures often do not move in tandem with the related volatility index. CBOE Holdings now offers futures and options on a number of indexes, including the GVZ Index, the CBOE Crude Oil ETF Volatility Index (OVX) and popular CBOE Volatility Index® (VIX®). Total volume on GVZ futures was more than 15,950 contracts in 2013.
To learn more about futures and options on volatility indexes, please visit www.cboe.com/volatility.