Last Week in Short-Term Volatility – 9/7/2014

VXST moved up a little on Monday, as it always does after a long weekend and worked higher into Friday’s employment report on Friday. Note that on Friday, with the S&P 500 under a little pressure, VXST actually opened lower. We are still getting a feel for how VXST acts around big economic numbers and it seems to display some of the behavior that we normally associate with individual stock implied volatility around an earnings event.VXST PA

The curve flattened a bit with the employment report and a three day weekend behind us. Checking in on the VXST option market there are several lines with open interest of 1000 or more expiring next week. The VXST Sep 10th 15, 18, and 20 Calls all seem to be generating some noise.


Last Week in Gold and Oil Volatility – 9/7/2014

Oil futures finished the week closer to 90.00 than 100.00.   This continues to perplex me as the demand for energy seems to continue to increase while the supply side of the equation has the potential to be impacted by a gamut of potential issues. OVX moved up on the week, mostly in the early part of the week, based on a move lower in oil futures.



The gold market appears to be at a crossroad and not the one that I would have expected. GLD is approaching the bottom end of the 120 – 130 range as shown in this GLD weekly price chart that covers all of 2014.

Gold Weekly 09052014

GVZ moved higher as well most likely based on a potential break of the support line in the chart above.


Sometimes what is not said may be as important as what has been said. This past week at the CBOE RMC Europe 2014 conference I never once heard anyone mention gold or oil which was not the case in 2014. This time last year there was no real interest in emerging markets and those markets have been rock stars in 2014 (at least so far) and came up a few times in conversations this past week. The low levels of volatility, despite the rise in both last week, sort of quantify this last of interest. Often the next area of trading opportunity is not where the masses are looking and the crowd isn’t watching GLD or USO too much these days.


Last Week in Emerging Market Volatility – 9/7/2014

This past week I was lucky enough to get to participate in CBOE’s Risk Management Conference just outside of Dublin, Ireland. There was one session where the presenter asked for members of the audience to raise their hands if they feel the emerging market sector is a safe place to get equity exposure these days. A good number of attendees raised their hands and he noted how interesting it is, with EEM up 10% this year, that people feel safe about the emerging market sector when no one was recommending putting money into emerging market stocks at the beginning of 2014. VXEEM, at pretty low levels, reflects this same positive outlook for EEM.


If people like EEM which is up 10% they must love EWZ (Brazil) which is up over 21% in 2014. However, Brazil is in its own little world, at least for the next few weeks, while we wait for national elections in early October. Hence the relative high level of VXEWZ which should come back down once the election result seems certain.


The most interesting thing showing up on the charts below should stand out to even the most casual volatility market. To use one of my mother’s favorite phrases (imagine the southern Alabama twang), “That VXEWZ curve just ain’t right”. No, it is not, however, it does tell a little story, and not the kind that contain a few white lies for illustration purposes.   The drop from October (the first future to expire after the elections) to November can be taken as the market expecting quick resolution once the Brazilian election is over. Now whether the results will be positive of negative for Brazilian stock is another story.


Last Week in Volatility Indexes and ETPs – 9/7/2014

The S&P 500 pulled out a gain for the week through shaking off what was called a bad employment report this past Friday. VXST and VIX rose as well for the week while the longer dated volatility indexes were down slightly. We have to attribute some of the VXST and VIX gains to rebounding from the three day weekend.


The long ETNs continue to suffer from no real sustainable move to the upside in VIX. VXX was down only 2.35% on the week, but it has given up over 35% for 2014. The short volatility ETPs (XIV and SVXY) both gained just over 2.3% and are both up about 29% for the year.

Options ETNs Table

Extended Trading Hours Volume at Record High So Far This Month – By Matt Moran

CBOE will host the 3rd Annual Risk Management Conference Europe on September 3 – 5 at the beautiful Powerscourt Hotel in Ireland. I anticipate that one of the main topics at the conference will be – how can investors manage risk around the clock, especially during non-US trading hours?

CBOE has positive developments to report regarding management of risk around the clock. In 2010 CBOE Futures Exchange (CFE) began offering futures on the CBOE Volatility Index® (VIX®) during select limited Extended Trading Hours (ETH). Beginning in June 2014, VIX futures trading hours were expanded to nearly 24 hours a day, five days a week. For VIX futures, the Extended Trading Hours (ETH) run from the start of the new trading day at 3:30 PM, until 8:30 AM Chicago time the following day, and the regular trading hours run from 8:30 AM until 3:15 PM Chicago time.

In addition, CBOE plans to launch Extended Trading Hours for options on both the S&P 500® and the VIX indexes in late October 2014, contingent upon completion of systems enhancements and SEC approval.

So far in the month of August (through August 22), the average daily volume for VIX futures during ETH was 24,556 contracts, the highest number when compared to previous full calendar months.

VIX-ETH Aug 22Worldwide geopolitical tensions could have impacted the fact that average daily volume for VIX futures during ETH has risen each of the past 3 months. The table below provides a breakdown of VIX futures average daily volume this month during different daily time periods. When speaking with European investors next week, I plan to note that the average daily volume for VIX futures during the time period from 2:00 AM to 8:30 AM has been more than 17,000 so far in August.

VIX-ETH Aug 22 TableTo learn more about strategies to manage risk around the clock, please visit and

VIX Last Week – 8/24/2014

VIX finished the week down almost 13% at 11.47. This closing price was only 0.17 higher than the 2014 low of 11.30. Do keep in mind that the 11.30 deserves some sort of asterisk as it came Thursday before the 3 ½ day Independence Day holiday. If the S&P 500 moves up this coming week we could easily see VIX with a 10 handle for the first time since before the 2008 crisis.



The lack of downside moves in the various VIX futures can be excused or taken as a signal. The excuse is that the spread between the futures and VIX was not wide enough so the drop in VIX put things closer to ‘normal’. The signal may be that volatility traders expect ‘something’ to cause a move up in VIX in the next few weeks. That ‘something’ can be any number of potential problems that are smoldering around the world.


A final reminder that this Monday, Tuesday, and Wednesday The Options Institute will be offering three webinars introducing VIX, covering VIX options and futures, and showing various strategies that may be implemented based on your VIX outlook. More info –

Gold and Oil Volatility Last Week – 8/24/2014

The SPDR Gold Shares ETF (GLD – 123.19) dropped about 2% last week, but stayed in the mid-120’s range that we have become accustomed to, although at the lower end of the range. GVZ moved up a tad, but with a 13 handle the direction does not mean as much as the level. The level of GVZ indicates traders are not worried about a break down or break out in the price of gold over the next few weeks.



Oil markets continue to defy logic by not exhibiting any global risk premium at all. The same can be said for OVX which is at the low end of historic levels after losing over 10% last week.


If there is any risk showing in the gold or oil markets it would come from the chart on the bottom right.   The OVX curve is pretty steep which shows despite current calm, the volatility futures show a price shock for oil before 2014 comes to an end is a distinct possibility.


Volatility Indexes and ETPs Last Week – 8/24/2014

The four S&P 500 volatility indexes dropped last week as the stock market measure made new all-time highs. The VXST discount to VIX may be attributed to very little in the way of significant economic news coming in the next few days.



In the ETP space the long oriented funds that focus on the short dated futures were down between 4% and 8%, depending on the amount of leverage involved. This is not so bad when VIX drops over 12% on the week. Sometimes it is not such a bad thing that these funds are based on the futures and not the spot index.

ETN Tables

Mid-morning on Friday there appeared to be one VXX option trader thinking we may get a volatility spike this coming week. Someone came in and sold just over 9,000 of the VXX Aug 29th 28 Puts at 0.89. VXX finished the day at 27.70 so the best case scenario for this put seller involves VXX rising at least 0.30 by next Friday.


VXST Last Week – 8/24/2014

The S&P 500 made new highs and VXST ran for cover almost hitting the single digits this past week dropping 24%. VXST takes a cue from what the S&P 500 is doing, but also has a forward looking component as well. There is very little in the form of known unknowns in the next week so VXST is reflecting this as well.


I’m surprised to see the September 10th contract at a discount to the September 3rd since the 10th is the first expiration after the August employment report which is due out on the 5th.   Out of interest, I’ll be keeping an eye on that pricing relationship over the next week.

VXST Table

Emerging Market Volatility Last Week – 8/24/2014

The iShares Emerging Markets ETF (EEM – 44.75) lagged the performance of the US markets last week rising only one-half a percent. VXEEM seemed diverge from EEM and took the lead from VIX dropping over 15% on the week. Complacency seems to be taking over the world.



Brazil is a country worth watching for the next couple of months. The stock market has defied all critics this year and is up just over 15% (based on the performance of the iShares MSCI Brazil Capped ETF (EWZ – 50.41).   Despite a 2% rise in EWZ, VXEWZ was down less than VXEEM. This less of a drop was also off of a higher base, which means VXEWZ has farther to drop.


The VXEEM curve is a normal looking yawner so let’s look to the right at the VXEWZ curve. As I mentioned Brazil is a market to watch and note the elevated levels of the September and October VXEWZ futures – that’s all about a big election coming up on October 5th. India experience a similar situation back in the spring and I look forward to seeing how VXEWZ plays out based on the potential change in leadership in Brazil.



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