Weekend Review – VIX Options and Futures – 7/10/2016

VIX finished the week at 13.20 – only 0.10 higher than lowest 2016 close of 13.10.  The front month (July) futures contract was down slightly more than VIX this past week.  Anecdotally I’ve noticed in the past when we see VIX down significantly in reaction to the employment number that the front month contract seems to give up extra value.  I attribute this to a lack of anticipated market news after the employment number until expiration.

VIX Futures Curve


At least on trader believes VIX is going to remain at low levels over the next couple of weeks.  With VIX at 13.56 and the July VIX contract at 15.20 there was a seller of 3,000 VIX Jul 16 Puts at 1.45 who also purchased 3,000 VIX 17 Puts at 2.29 and a net cost of 0.84.  As long as VIX remains under 16.00 into expiation this trade will result in a profit of 0.16 and the worst case scenario is for VIX to finish over 17.00, both options expiring with no value and the 0.84 cost resulting in a loss.



Weekend Review – Volatility Indexes and ETPs – 7/10/2016

I was participating in the Vol Views podcast Friday around lunch time and decided to take a look at the whole suite of volatility indexes and see if anything was higher.  None of the 29 volatility indexes CBOE quotes were higher at that time and none of them finished higher on Friday.  The list below shows the price changes ranked on a percentage basis on Friday.Vol Index Change


The four S&P 500 related volatility indexes moved lower last week.  The largest drop came from VIX which lost over 10% while the smallest move to the downside was VXST (9-day volatility) which was down about 3 ½%.  VIX is also only 0.10 higher than the 2016 closing low while VXST is still well above the 2016 low of 9.77.



The VIX of VIX (VVIX) remained fairly high in the mid-80’s and SKEW is still a bit elevated.  The ETPs did what they do when the stock market is higher with the long and leveraged long funds down dramatically for the week and XIV and SVXY reaping the rewards of the equity market rebound from the Brexit scare combined with a positive reaction to Friday’s employment report.

VXX Table


Finally, a glance at the year to date performance for the funds that represents long, leveraged long, and short volatility strategies.  SVXY representing short volatility is now up 9.4% for the year with just about all that coming last week.  VXX is down 39.3% and UVYX is down 74.2% after being up as much as 100% for the year.



Weekend Review – Volatility Indexes and ETPs – 7/3/2016

In hindsight volatility definitely overshot to the upside in response to Brexit and the price action on Monday where VIX and the S&P 500 both moved lower together was a sign of things to come last week. The 42.66% drop in VIX was the biggest week over week drop on record (going back to 1990). The whole VXST – VIX – VXV – VXMT underwent a shift from one extreme to the other last week.


SKEW put in an all-time high and then backed off to more normal levels. TYVIX also had a pretty big drop as the mind of the global financial markets shifted from end of the world back to normal mode. The one volatility index on the table below that remains at a cautious level is VVIX. Do not discount the elevated VVIX level as an outlier as the VIX of VIX has done a good job of being a leading indicator for market volatility for several months now.

VXX Table

Finally, in the ETP space, last week VXX gave up 20%, UVXY almost doubled that, and SVXY rose over 17%. It just took a week, but SVXY is back to green for 2016, however so slightly.


Weekend Review – VIX Futures and Options – 7/3/2016

The curve below is what happens when you have the biggest week over week drop for VIX on record. The 42% loss in VIX shattered the previous largest drop of 36.53% which occurred in the last week of 2012. Not so coincidentally both were weeks before a three-day weekend.

VIX Curve - Table

Late Monday, with the July VIX Futures at 23.70 and spot VIX at 23.85 someone came in taking a long position in the VIX Jul 20th 22 Puts paying 2.75. The payoff at July settlement appears below, but by the end of the week with both the July futures and spot VIX much lower the trade had an unrealized profit of 2.85 as the bid side for the July 22 Puts was 5.60 to end the day.


First Half of 2016 Confirms Higher Volatility Regime

We are already half way done with 2016 and it appears what we thought going into the year is being confirmed by SPX implied volatility. If the Fall of 2015 there was lots of chatter about the equity markets in the US shifting from a low to a high volatility regime. The low volatility regime had been in place for several years and the first signal of a change came back in late August 2015 when VIX topped 50 intraday for the first time since the great financial crisis. I have two favorite charts that give a good long term perspective on VIX and couldn’t decide which one to use so I settled on both.

First, we have the high low range plus average by year for VIX going back to 1990. We have higher low and a higher average over the first six months of 2016. In fact on the far right side of the chart the VIX low and average have both been moving higher since 2014.

VIX H L A By Year

The second chart shows the 1 year, 5 year, and 10 year rolling moving average for VIX over the last 15 years or so. It’s hard to see, but I promise that the 1 year average is slightly higher than the 5 year average. The last time we had a cross over like this was in November 2007. I don’t think anyone needs a reminder where the equity markets went after that cross over.

VIX LT Moving Averages

So the consensus thinking was we were shifting into a higher volatility regime and it appears that the first half of 2016 has confirmed the mind of the market.

Weekend Review – Volatility Indexes and ETPs – 6/26/2016

Global stocks took it on the chin Friday after the outcome for the vote in Britain determined that the majority of voters want to break from the European Union. Usually I show the week over week change for VXST, VIX, VXV, and VXMT to lead off this blog. Because the week over week change doesn’t tell the full story I included the closing prices from Thursday as well.


The lowest line on the chart shows the closing levels for each of these S&P 500 oriented volatility indexes the day before the US stock market reacted to the news out of Britain. Two things stand out on this chart. First, the line is lower than last week’s close which shows that the one day move for volatility was greater than the week over week move for each index. Something else that stands out is the relative level of VXST to VIX. VXST is a nine-day measure of volatility as indicated by very short dated SPX option pricing. Regardless of how certain the bookies were in Britain with respect to the vote going ‘remain’ the option market was poised for a bit of short term risk.  Sometimes the financial markets are smarter than the gambling houses.

Every ETP on the table below is down for 2016 with one exception. The iPath S&P 500 VIX Mid Term Futures ETN (VXZ) finished last week up 1.33% and is up 2.42% for 2016. Otherwise the rest of the funds have suffered from the choppiness that has been the volatility markets in 2016. That type of price action took a toll on the inverse funds last week which finished down much more than VXX and the long funds were higher.

VXX Table

Many other things stand out on the table below. VVIX at 125.13 is a 2016 high. SKEW finished the week at 142.92 which is just a little bit lower than the 2016 high of 145.88. What is impressive about SKEW is that it is a measure of the relative implied volatility of far out of the money SPX put options compared to options with a strike price closer to the S&P 500. That means it is a relative volatility measure and that out of the money volatility has to rise dramatically to maintain a high level. With VIX in the mid 20’s SKEW over 140 is very impressive and worrisome for market bulls if the high price of out of the money SPX puts proves to be justified.

The chart below is a favorite of mine as it compares the year to date performance of VXX, SVXY, and UVXY by indexing each fund to 100 to begin the year. In the words of a pretty smart guy, Eli Mintz or @VixCentral, who commented on Twitter, “The churn has devastated SVXY and XIV”. The result of last week’s action has SVXY in line with VXX which are both down in in the mid-teens on a percentage basis for 2016.

VXX SVXY UVXY Performance

Weekend Review – VIX Futures and Options – 6/26/2016

On Thursday the world appeared to have dodged a bullet, but much like counting your chickens before the hatch, the market reacted a little too quickly and early to the assumed outcome of the EU referendum in Britain. The result was Friday which does not need to be rehashed here.

The week over week changes for VIX and the standard monthly VIX futures appear below. Things we look more dramatic if I’d use the Thursday to Friday changes to construct the chart.

VIX Curve Table

Periodically I’ll throw how the near dated futures are doing relative to spot VIX. This is as good a time as any to look at the generic week over week short term VIX futures and spot VIX changes. I’ve started to learn that a flat shape for the short term curve is close to normal. This is a good description of the 6/17 pricing below. We rarely see a defined shape, but the Friday closing prices are in a definite backwardation when comparing the next three weekly expirations to each other and spot VIX.

VIX ST Curve Table

We got list making moves from VIX last week. What I mean is we got a move that ranked highly relative to other VIX one day price changes. However, one of the moves are not exactly what people would expect.

First, the not so surprising historically significant move was Friday with VIX rising 49.33% which is the 5th biggest rise for VIX on record.   The top ten positive price changes from VIX appear in the table below.

VIX Rankings

Now on the what many people missed. Thursday VIX was down 18.52% which is the 15th biggest drop on record. The table below shows the 15 biggest drops on record for VIX including Thursday’s price action.

VIX Drop Rankings

OK, great we had some big moves. Everyone is looking for signals as to what to expect now. The trading week is on the horizon and we are all putting in overtime this weekend to prepare for what is to come. With that line of thinking I took a look at what the S&P 500 did after big moves in either direction for VIX.

First, back to the biggest rally days. Arbitrarily I looked at 5, 10, 20, and 30 day price changes for the S&P 500 after each of the big rallies in VIX. The history is sort of a mixed bag. More often than not, 30 days down the road the stock market has moved up, but there a couple of nasty drawdowns included on the table below.

SP Rankings

Now for the S&P 500 post a big drop in VIX. For the dramatic VIX drops, or the top 10 on the list below, there are a lot of red numbers. You get below the first ten and the results are a bit more positive. But again the results are a mixed bag.

SP After Drop Rankings

VIX® Index Jumps 49.3% on Friday, with Record Overnight Volume for VIX Futures – By Matt Moran

The CBOE Volatility Index® (VIX®) rose 49.3% on June 24, after the results of the Brexit referendum were announced. The VIX Index is a key measure of market expectations of near-term volatility conveyed by S&P 500® stock index option prices.

2 - VIX on June 23


On June 24 the CBOE Futures Exchange, LLC (CFE®) announced record volume was set in VIX futures traded in non-U.S. trading hours with an estimated 235,000 contracts changing hands. The June 24 record surpasses the previous single-day record of 140,811 contracts set during the overnight session on August 24, 2015.

VIX futures now have expirations on several near-term Wednesdays. The table below shows that the VIX futures rose by more than 5.5 points for all four expirations in the next month.

3-VIX Futures June 24 close


A key issue for some cautious investors who want to hedge is – what are the implied volatilities for various out-of-the-money (O-T-M) put options on equity securities that can be used to hedge my portfolio?

Below are Livevol skew charts for two key securities – S&P 500 (SPX) Index and FXB ETF – that show global implied volatility this morning at various strike prices and maturities. The O-T-M put options generally had much higher implied volatility than the at-the-money or in-the-money put options. CBOE  offers both Wednesday and Friday expirations on S&P 500 (SPX) options. www.cboe.com/SPX.

1. S&P 500 Skew Chart


2 FXB Skew

Also note that the CBOE SKEW Index recently closed at 145.70, one of its highest levels in history. www.cboe.com/SKEW.

A Quick Look at Overnight VIX Price Action

Things are moving faster than I can type this morning, but here’s a quick update and some perspective on the overnight VIX action in response to Britain voting to exit the EU. Global stock futures are lower and we all know that results in higher volatility. The curve made a pretty dramatic shift with VIX rising over 40%.

VIX ON Table

The table above only shows the monthly contracts, but it is worth noting that the VIX Weekly Futures contract expiring next Wednesday was up about 40% to 22.50 when I last checked. Finally, since we will be all about the biggest move in context, the table below shows the ten biggest one-day percent moves for VIX using the 6:30 am price for today. So far the VIX move would be the 7th biggest on record, but the day is still young.

VIX Daily Ranking

Looking back a few extra hours it is worth noting that on Thursday VIX dropped 18.52% to finish the day at 17.25.  This was actually the 15th biggest drop on record for VIX.

VIX Drop Table

Key VIX Futures Prices Jump More Than 60% By Early Friday Morning – By Matt Moran

JUNE 24, 2016 – Prices for certain futures contracts on the CBOE Volatility Index® (VIX®) rose more than 60% during the early part of the June 24 trading day, as more updates about the anticipated results of the Brexit referendum were divulged.

At around 12:45 am ET on June 24 —

(1) the VIX Weekly futures contract that expires on June 29 was up more than 75%,

(2) the VIX futures contact that expires on July 20 rose about 63%, and

(3) the reported trading volume for VIX futures during the Extended Trading Hours session already had topped 100,000 contracts.

You can check the websites http://cfe.cboe.com/ and www.cboe.com/VIX for delayed price quotes and more information.

VIX Futures June 24


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