VIX Last Week – June 29 – July 2

VIX rallied over 34% on Monday as the Greece situation worsened and global equity markets sold off. The front month July VIX contract gained just under 20%. As the week progressed we gained insight into June economic activity with an unusual Thursday release of the non-farm payroll report. The stock market moved on quickly and VIX and the July future both finished the week with a 16 handle.  The curve, which moved to backwardation on Monday finished the week in contango, but a much flatter version of contango than we have witnessed as of late.

VIX Curve

On Thursday last week I came across a trade I do not normally see executed in the VIX pit. There was a broken wing butterfly that involved selling the VIX Jul 20 Call at 1.22 and VIX Jul 20 Put at 4.24.   For downside protection the VIX Jul 14 Put was purchased for 0.33 and to the upside the VIX Jul 25 Call was bought at 0.63. All this activity resulted in a credit of 4.50. Those that are quick with numbers will notice that the long put is six points lower than the short option strike while the call is five points higher.


Note the July VIX futures and spot VIX closed with a 16 handle on Thursday. That means the trader behind this particular position is hoping for higher VIX with a specific target of 20.00 at July expiration. Normally we think of any time of butterfly having a neutral price outlook, that’s not the case in this instance.

Volatility Indexes and ETPs Last Week – June 29 – July 2

We had the most exciting market action during the holiday shortened week. As everyone knows we can thanks the cradle of civilization Greece for all the hub bub. On Monday the S&P 500 was down over 2% for the first time since October of last year. VIX reacted accordingly by rising over 34% on the day for the biggest one day move in over two years.

Despite the S&P 500 rebounding a bit, the VXST – VIX – VXV – VXMT curve continues to signal some concern. The VXST to VIX premium is pretty interesting considering that on Thursday we got the June employment number behind us and we are in the middle of a long weekend. Typically VXST experiences a big of a head wind going into a long weekend due to the calculation being based on calendar days. I was honestly a bit surprised at the shape of the curve when I started putting this blog together Thursday night.


I often respond to criticism of VXX by stating that, “it does what it is supposed to do when it is supposed to do it.” This past week the long ETPs did what they were designed to do and rallied on Monday in response to a dramatic increase in market volatility.

VIX Index Table

Late Thursday a ratio spread was executed in the UVYX space that will result in a profit as long as UVYX does not rally over 43% between now and July 10th. With UVYX at 42.32 there was a buyer of 300 UVXY Jul 10th 55 Calls at 1.90 who also sold 600 UVYX Jul 10th 60 Calls at 1.39 each for a net credit of 0.88 per spread. The payout diagram below shows how things will turn out base on this spread being held through the close this coming Friday.


UVXY finished the day at 42.59 and the break-even price for this trade is up at 65.88. That’s a 43.6% move to break-even. As long as UVXY finishes the week at 55 or lower the result will be the 0.88 per spread credit taken in when the spread was established turning into a profit.

Block Trade Analysis – VXX Option Trade from Monday

Monday of this past week was one of the more exciting days we have had in 2015. That’s probably an understatement since VIX futures volume was the highest it has been this year. When the S&P 500 is down and volatility is up there are traders always looking to take the other side of the move. Either through selling volatility or through getting long the stock market. The iPath S&P 500 Short Term Futures ETN (VXX) market is one instrument that can move quickly to the upside when the S&P 500 is under pressure. The daily chart shows the VXX move on Monday which was 17.6% higher than where it closed four days earlier.

VXX Chart

Taking the other side of a big move is commonly referred to as a fade trade.   This type of trade involves taking the other side of momentum in the market which can be dangerous if the correct risk controls are not put in place.   A vertical spread, whether bullish or bearish, is a common way of fading a big move since the maximum potential loss from the trade is defined when the spread is initiated. When VXX is up tremendously like it was on Monday I go searching for short dated bear call spreads in the VXX option market.

With less than an hour left in the day Monday, and the stock market actually making new lows, there was a seller of 5,000 Bear Call Spreads. Specifically the VXX Jul 2nd 21 Calls were sold at 0.61 and the VXX Jul 2nd 26 Calls were purchased for 0.09 and a net credit of 0.52.


Note in the payoff diagram above that the 21.00 prices level is about 3.5% higher than were VXX was trading when the spread was initiated. As long as VXX was not over 21.00 at expiration this trade results in a profit of 0.52. The maximum potential loss of 4.48 for this trade occurs at 26.00 or higher. However, to reach this price level VXX needed to climb another 28% in three days.

Big Week for VIX re: Backwardation, Big Moves and Volume, ETH, Put/Call Ratio, and Bollinger Bands – by Matt Moran

After the news broke last Sunday (June 28) regarding the closing of banks in Greece, worldwide markets for stocks and oil plunged, and investors sought assets that could rise and serve as diversifiers. The VIX® July futures prices responded by rising from 14.525 on June 26 to 17.375 on the next trading day (June 29).

Below are seven key points about VIX action during this past big week – these points could be of interest to technical analysts who are looking for trading signals, and to portfolio managers who wish to diversify in times of market stress around-the-clock.

1. BACKWARDATION — For the first time since January, VIX was in backwardation for 3 straight days (see Figure 1 below);
2. VIX OPTIONS DAILY VOLUME – rose to 946,467 on June 30 (see Figure 2 below);
3. VIX FUTURES DAILY VOLUME – rose to 417,574 on June 29 (the highest daily total in 2015; see Figure 3);
4. VIX INDEX ROSE 34.5% ON JUNE 29 — (biggest daily % rise in 2 years) (see Figure 4);
5. VIX 20-DAY ROLLING PUT/CALL RATIO – fell to 0.31 on June 30, its lowest level since 2008 (see Figure 5);
6. BOLLINGER BANDS FOR VIX INDEX – dropped below the lower band on June 23 and 24 (first time below lower band in 2015 (see Figure 6));
7. RECORD VOLUME DURING ETH SESSION – VIX futures volume in the 5 pm (Sunday)-to-2 am CT session was a record 32,617 (estimated) contracts, an all-time record for that 5 pm-to-2 am CT time period. For more on Extended Trading Hours (ETH) for VIX futures and for VIX and SPX options, please visit

1&2 - Backwa & VIX Opt volu

3 & 4 - VIX Fut volum VIX biggest day moves

5 & 6 - Put-call & Bollinger

For investors who wish to learn more about the CBOE Volatility Index® (VIX®) and related portfolio management and diversification tools, they can –

  • Visit
  • Register to attend an upcoming CBOE Risk Management Conference (RMC) to hear expert presentations on managing volatility –
    1. RMC Europe: Monday-Wednesday, September 28-30, 2015 at the InterContinental Hotel, Geneva
    2. RMC Asia: Monday-Tuesday, November 30-December 1, 2015, at the JW Marriott Hotel, Hong Kong
    3. RMC US: Monday – Wednesday, February 29 through March 2, 2016 at the Hyatt Regency Coconut Point, FL


Mid-Year Recap – Vol-selling Indexes Up; Big Jump for VIX and VVIX on June 29 – By Matt Moran

A recent Bloomberg story noted —

“The S&P 500 drifted to an all-time high on May 21, before the Greece crisis overshadowed signs that a first-quarter slowdown in economic growth would prove transitory. The benchmark index tumbled 2.1 percent Monday, the most since April 2014 and erasing gains for the year, as Greece surprised investors by shutting lenders and imposing capital controls after debt negotiations broke down.”

Below are four key points regarding volatility and options-based indexes.

The first chart below shows the percentage change for the 1st half of 2015 for 8 CBOE performance benchmark indexes and the CBOE Volatility Index® (VIX®). Two benchmark indexes that sell one-month VIX futures – VPD and VPN – both rose more than 7%, while two benchmark indexes that sell at-the-money one-month S&P 500® (SPX) index options – BXM and PUT – both rose by more than 3%.

1- Benchmrks 1st half

The index with the highest returns for the first half was the CBOE VIX Premium Strategy Index (VPD); this index tracks the value of a portfolio that overlays a sequence of short one-month VIX futures on a money market account. The VIX futures are held until expiration and new VIX futures are then sold. The money market account decreases leverage relative to a stand-alone short position in VIX futures. To further limit risk, the number of VIX futures sold at each roll is set to preserve 75% of the initial value of the portfolio in the event that VIX futures increase by 25 points. To learn more about CBOE’s benchmark indexes (which could be appealing in times of low interest rates and high p/e ratios), please visit

On Monday, June 29, after the markets absorbed news regarding the closing of banks in Greece, (1) the CBOE VIX of VIX Index (ticker VVIX) rose 40.8%, and (2) the VIX Index rose 34.5%, its biggest one-day move (in percentage terms) in more than two years.

2 - table big VIX moves

Investors often inquire as to whether the VIX Index recently has been relatively low or high. In the first half of 2015, the average daily close for the VIX Index was 15.1, which was higher than its 14.2 average for each of the last two calendar years, but was much lower than the average in 2008 and 2009. In viewing the chart below it is interesting to ask whether the VIX price levels move in cycles and if the VIX may begin to trend upward the next few years.

2-VIX avg per year

For investors who wishing to gain a better idea of the relative costs of hedging with SPX protective puts and VIX calls, three key CBOE indexes to watch are the SKEW, VVIX, and VIX indexes. CBOE SKEW Index values, which are calculated from weighted strips of out-of-the-money S&P 500 options, rise to higher levels as investors become more fearful of a “black swan” event — an unexpected event of large magnitude and consequence. The value of SKEW increases with the expected tail risk of S&P 500 returns. If there were no tail risk expectations, SKEW would be equal to 100. Historically, SKEW has varied in a range of 100 to 147 around an average value of 115. So far in 2015 the average value of the CBOE SKEW Index has been 124.6, indicating that there is some strong interest in tail risk protection.



To learn more about the above indexes and download data and white papers, please visit and

On Sunday Night VIX Futures Volume Topped 26,600, as VIX Futures Rose 10.8% – By Matt Moran

       Managing Volatility Around-the-Clock

SUNDAY, JULY 28 AT 11 PM CT – Tonight the VIX futures estimated volume topped 26,600 contracts, and the VIX nearby (July) futures rose 10.8% in the time period from 5 p.m. to around 10:30 p.m. Chicago time. News stories tonight indicated that the Euro, many Asian stock indexes, and U.S. stock futures prices were falling due to worries about the Greece crisis and the closing of banks in Greece.

Each week’s trading in VIX® futures generally begins at 5 p.m. CT on Sunday night. Extended trading hours are offered for VIX futures, and (beginning at 2 a.m. Chicago time on Monday) for options on the S&P 500® (SPX) and on the CBOE Volatility Index® (VIX). VIX futures are offered more than 23 hours a day on trading days. To learn more about extended trading hours, please visit

The table below shows delayed quotes for VIX futures prices from at 10:30 p.m. tonight. The July 2015 VIX futures (ticker VIX/N5) rose 10.8% compared to their closing price on Friday.

VIX table on Sun July 28For investors who are concerned about managing volatility around-the-clock, VIX futures, and options on VIX and SPX could be valuable investment tools. Protective positions that could be considered include long positions in (1) VIX futures, (2) VIX call options, and (3) SPX put options. To learn more about these strategies, please visit the Education tab at

The Greece Crisis is Not Our Concern, Say US Options Investors

English speakers have grown to love the German word schadenfreude. But what’s the single word for indifference to the suffering of others? We need to figure this out to describe what’s happening in the US options markets.

For the past decade, European and US options investors have been sympathetic to each other’s pains. When we chart the EURO STOXX 50 Volatility Index (VSTOXX) against the CBOE Volatility Index (VIX), we can see that the VSTOXX has typically been a little higher than VIX, but that these two indices have moved largely in sync.

Something strange has happened, though, in the past year. VSTOXX and VIX have diverged. As VSTOXX has gone up, VIX has stayed near its floor in the low teens.


This is easier to see when we subtract the daily values of VIX from the daily values of VSTOXX and chart the difference. For only the third time in the past decade, the gap between these two measures has hit 15 volatility points.


The chart below shows the same measure, but just over the past 18 months. The trend is unmistakable.


Why this decoupling? One explanation I have heard is that investors see the troubles in Greece more as a political crisis than a financial one. Financial crises, such as the one that rocked the world in 2008, tend to more directly affect financial institutions that span multiple regions. Political crises, on the other hand, are less likely to spill over borders. Or so the theory says. Personally, I have difficulty seeing the difference between the two types of crises in this case.

Record Volume Today in ETH Session for VIX Options – By Matt Moran

June 16, 2015 – Yesterday the CBOE Volatility Index® (VIX®) rose to its monthly closing high of 15.39, and earlier today in the June 16 Extended Trading Hours (ETH) sessions, the estimated trading volumes during ETH were 30,920 for VIX futures (the high for the month), and 6,984 for VIX options (the all-time record high). CBOE Holdings is now offering Extended Trading Hours (ETH) on key popular index futures and options contracts in order to provide investors with the ability to take advantage of market opportunities as they happen, and to manage portfolios and volatility throughout more trading hours around the clock.


SPX and VIX Options

CBOE offers ETH sessions for options on the VIX Index, and for options on the SPX and SPXW (SPX Weeklys and SPX End-of-Month).
2 - VIX & SPX options ETH

VIX Futures
Beginning in June 2014, VIX futures trading hours on CFE were expanded to nearly 24 hours a day, five days a week.
3 - VIX Futures ETHFor more information on Extended Trading Hours (ETH), please visit

Last Week in VIX – 5/31/2015

The S&P 500 drop, which can be mostly attributed to market action on Friday, resulted in VIX putting up a pretty bullish week. Everyone is aware that we had a short week last week and VIX traders know this can cause a little disorientation when looking at VIX relative to the futures pricing. The curve below shows that VIX was up over 14% last week while the respective futures were pretty quiet. VIX futures traders are aware that VIX is a bit depressed before long weekends and tends to rebound afterward.

VIX Curve Table

With a couple of hours to go in the day on Friday there was a long call broken wing butterfly trade that came into the VIX pit. The trader purchased 1 VIX Jun 15 Call at 0.86, sold 2 VIX Jun 19 Calls for 0.37 each and finished the trade by purchasing 1 VIX Jun 22 Call for 0.22. The end result was a cost of 0.34 per spread. If you multiply 10,000 times the sizes above you get the idea of how big this trade was. The payout below, as always, assumes the trade is held to June expiration –


With VIX over 15.34 this trade is in good shape at expiration. However, as we are going into a week that may result in some extra volatility for the equity markets I would assume early profit taking on any spike in VIX and the June VIX futures.

Last Week in Volatility Indexes and ETPs – 5/31/2015

Short term volatility rose last week based on stock market action and some impact from the holiday weekend. VXST’s 42% rise is partially attributed to the three day weekend being behind us and we can probably give a little credit to the day off Monday for the 14% rise in VIX. The issue that has nothing to do with the four day work week is the shape of the curve below which shows VXST is basically in line with VIX as of Friday’s close. This is an indication that option traders are bracing a little for next week which could bring news from Greece as well as definitely learning about the employment situation in the US during May.


The long volatility related rose a bit last week with the gain in VIX and VIX futures that resulted from the almost 1% drop in the S&P 500.

VIX Table Corrected


As mentioned, VXX was up slightly for the week, but one trader appears to be looking for the move higher to be short lived. About mid-day on Friday, with VXX trading at 19.18, a trader came in and sold about 1,000 VXX Jun 6th 17.50 Puts for 0.03 and then 30 seconds later purchased the same number of VXX Jun 6th 18.00 Puts for 0.10 and a net cost of 0.07. If VXX finishes the week next week at or below 17.50 then the result is a profit of 0.43 which shows up nicely on the payout diagram below.


I highlighted the difference between where VXX closed on Friday and the short strike of 17.50 which is very close to 8% lower than where the fund closed on Friday. That 8% level sparked my interest and I did a little more digging based on that price point. I pulled weekly data on VXX since the fund was launched in early 2009. Of 330 weekly observations, VXX has lost 8% or more 61 times or just under 20% of the time. So with this trade there is a risk of 0.07 and a potential gain of 0.43 and based on history there is just under a 1 in 5 chance this trade will work out. A consistently calm or bullish stock market next week will be the key for potential success, but based on what has happened in the past, that 8% drop isn’t too farfetched.


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