Last Week in VIX – 3/16/2014

Despite there being only one day left to trade March VIX futures and options, there was a lot of activity on Friday in the March options.  In fact Friday was the second busiest volume day ever in the VIX option arena with over 1.8 million contracts changing hands.  Only February 3, 2014 was a busier day.  March 15 through 25 strike call options were pretty heavily traded with bullish spreads and long call trades coming in throughout the day.  There may have been some short covering, but there was a feeling that there was some short term protection against the stock market coming under pressure on Monday after the election in Crimea is done.   Again, keep in mind that due to Good Friday falling on a third Friday in April we have March VIX settlement on the open Tuesday (instead of Wednesday).  That means a call bought on Friday is targeting a ‘volatility event’ only on Monday of this week.

VIX

Last Week in VXST – 3/16/2014

Last week the S&P 500 dropped 2 percent or so and the CBOE Short Term Volatility Index (VXST – 20.64) rose a whopping 62%.  When I use other people’s material I always give credit and Mark Sebastian has stated that if VIX is a fear index VXST is the panic button.  I wonder if the marketing department is looking into devices like the Staple’s Easy Button…

The biggest news about VXST did not occur in Chicago, but in sunny Boca Raton where it was disclosed that VXST option trading is coming soon!  Pending the regulatory approval VXST options will list on Thursday April 10th.  In anticipation of that event I will be doing a webcast for CBOE this coming Thursday March 20th at 3:30 Chicago time – more information on that can be found at www.cboe.com/aboutcboe/events.aspx

VXST

Last Week in Gold and Oil Volatility – 3/16/2014

Vladimir Putin has been accused of many things but I don’t think he’s ever been called a ‘gold bug’.  For those born after 1990 a gold bug is considered someone bullish on gold.  The SPDR Gold Shares ETF (133.10) closed above 130 for the first time since October.  Of course this prompted me to create a price chart.  It appears that if GLD can get over the mid-130’s there is not much in the way as far as resistance until the 150’s.

GLD Weeklys

 

Gold is often an asset looked to as a safe haven when there is uncertainty in the world and actions taken by Russia helped put the GLD to higher levels and also managed to push implied volatility of gold options higher.  GLD was up 3% and the CBOE Gold ETF Volatility Index (GVZ – 18.32) took notice rising 15.8%.  The March futures closed at a slight premium of 18.90 on Friday which I found interesting.  Due to the Good Friday holiday in April volatility derivative settlement is on the open Tuesday this month.  That means the March GVZ Future went out at a premium to the index with only one day left to trade.

GVZ OVX

Last Week in Russell 2000 and Nasdaq-100 Volatility – 3/16/2014

When the equity markets come under pressure due to a geopolitical or macro-economic event the result is nervousness about the unknown.  This type of nervousness often results in pushing VIX up more dramatically than VXN or RVX.  This past week was another example of this as VIX rose 26% while VXN was up 24% and RVX rose 17%.

RVX - VIX Spread

Note above the spread between RVX and VIX is represented by the bottom purple line.  The difference between the two was 4 points as of Friday.  This compares with a recent range between 2 and 7.  We are closer to the bottom end of that range, but have a way to go.  The way I interpret this is if RVX is ‘too high’ relative to VIX then domestic risk concerns outweigh global while at the low end of the spread the market is more focused on global risk.  The spread was close to 7 earlier this year which led me to thing the focus of the equity market in the US was mostly domestic, at 4 Russia vs. Ukraine seems to be weighing in on the fear radar of market participants, but there are still some domestic concerns out there as well.

VXN RVX

Last Week in Emerging Market Volatility – 3/16/2014

The emerging markets continue to be confronted with issues that block any sort of bullish run and many of these issues are out of the control of the impacted country.  Fed tapering was a big deal and now unrest in Ukraine is getting in the way.  Whatever the reason the emerging market sector is having a tough 2014 and last week did not make things better.  The iShares MSCI Emerging Markets ETF (EEM – 38.40) lost almost 3% last week and is now down a little over 8% in 2014.  Brazil fared no better also losing about 3% on the week which places the iShares MSCI Brazil Capped ETF (EWZ – 39.11) down 12.5% for 2014.

EWZ VXEWZ

I keep thinking the bottom is in for the 2014 World Cup and 2016 Summer Olympics, but then another bump in the road comes along.  VXEWZ closed at the highest level since July 13, 2013 this week.   I faintly remember a bullish run from EWZ during the second half of last year and did some digging with the result being the chart above.  August of last year was the last time we had VXEWZ in the low 30’s and after having chopped around for a while this was the beginning of a short lived rally of about 20% for EWZ.  Time will tell if history repeats itself.  Of course you never know who is going to take actions to put more worry into the markets, but for now the nervous factor for Brazil is priced in.

VXEEM VXEWZ

Last Week in VIX Options and ETNs – 3/16/2014

There seems to be global nervousness which resulted in almost a 2% drop in the S&P 500 this past week.  As would be expected the suite of volatility indexes that are based on S&P 500 option trading all moved higher with VXST leading the charge and rising 62% and VIX climbing by over 26%.  The chart below shows that not only was near dated volatility higher, but VXV (93 Day) and VXMT (184 Day) were up as well.   Finally, do note that the VIX of VIX (VVIX) was up almost 17% last week closing near the 100 level which was the high end of the range in 2013.

VXST - VIX - VXV - VXMT Curve

 

In the exchange traded product space the long oriented funds were up about 8%.  VXX and the other non-leveraged long funds are almost 90% weighted in the April VIX futures contract which was up about 8% as well last week.  The March futures only have one more day to trade until expiration so the impact of changes from the March future does not influence VXX as much as April.

As noted VVIX approached 100 based on demand for VIX calls.  There were actually some buyers of slightly out of the money March VIX calls on Friday.  This is interesting as the last trading day for March VIX options (and futures) is Monday based on a holiday in April.  Some people are a little nervous about some market jolting news hitting the markets over the weekend and are looking to VIX calls either as portfolio protection or as a short term long volatility trade.

Options - ETNs

All-time Volume for VIX Futures in Extended Trading Hours (ETH) Tops 1.1 Million – By Matt Moran

Extended Trading Hours (ETH) are now offered for futures on the CBOE Volatility Index® (VIX®) during the following time periods –

  • 2:00 a.m. to 8:30 a.m. Monday through Friday CT (Chicago time)
  • 3:30 p.m. to 4:15 p.m. Monday through Thursday CT (Chicago time)

These ETH sessions have been in place since October 2013.  In a Sept. 30, 2013, press release, CBOE Holdings Chief Executive Officer Edward T. Tilly commented “We are pleased to provide our European customers with the opportunity to trade VIX futures during local trading hours, but we also believe our entire global base of VIX users will benefit by extended trading hours.” 

 Here are some volume facts re: ETH –

  • All-time total volume for VIX futures during Extended Trading Hours (ETH) has topped 1.1 million contracts.
  • Average daily volume for VIX futures during ETH so far in 2014 is more than 16,800 contracts.

THREE CHARTS COVERING THE PAST 37 BUSINESS DAYS

Below are three charts that all cover the past 37 business days.  The top chart shows daily volume for VIX futures during ETH business days.  Note that the session from 3:30 to 4:15 PM Chicago time marks the start of the next business day, and that session does not occur on Friday afternoons (and so there is no volume indicated for the session on the Monday business days).

It is interesting to interrelate the data of all three charts below; big volume days often can coincide with big moves in volatility indexes. As shown in top chart, the top two days for VIX futures ETH trading volume were —

  • 51,984 on Jan. 31, 2014, and
  • 37,219 on March 3, 2014 (when the Ukraine crisis was heating up).

On Feb. 3 the VXST Index rose 24% to close at 23.95 (its highest close of 2014 YTD), and the VIX rose 16.5% to close at 21.44 (its highest close of 2014 YTD).  On March 3 the VXST rose 24.4% and the VIX rose 14.3%.

VIX VXST and ETH graphs2

MORE INFORMATION

Extended Trading Hours (ETH) will be discussed at by institutional investors at –

To learn more about the VIX Index, VIX futures and Extended Trading Hours, please visit www.cboe.com/VIX.

  

Last Week in VIX – 3/9/2014

VIX got a day in the spotlight on Monday when the fear index rose 14% based on events going on in a country that 89% of Americans cannot find on a map (this like 99.7% of other statistics was made up).  The S&P 500 sold off early and then trudged higher on Monday.   The path higher for the S&P 500 continued into Friday where another record close was recorded.  Since VIX was recovering from a visit to the 16’s on Monday the week over week result was basically unchanged despite the S&P 500 gaining 1.00%.  Do note on the chart below that March is at a pretty nice premium relative to the spot index.  VIX March futures and options expire on the open on Tuesday, March 18th – this is a function of there being a market holiday on April 19th this year.  Keep in mind we have six trading days left for March VIX contracts and only one trading day after next weekend.

VIX

Last Week in Russell 2000 and Nasdaq-100 Volatility – 3/9/2014

The S&P 500 closed on a record high Friday afternoon, while record highs were set earlier in the week for the Nasdaq-100 and Russell 2000.  Despite the S&P 500 hitting another record to end the week, this is case of playing catch up as the S&P 500 performance in 2014 of up 1.60% is about half the performance from the technology heavy Nasdaq-100 (up 3.58%) and small cap Russell 2000 (up 3.30%).  The resulting performance for VXN saw a gain of about 1.5% while RVX dropped 4.41%.  The drop in RVX brings it down to being more in line with the spread between RVX and VIX that the market witnessed for most of 2013.

RVX option trading continues to gain some interest.  Right now the biggest open interest for March RVX options is in the RVX Mar 29 Calls with 300 contracts open and the open interest for RVX Apr 24 Calls is 200 contracts.

VXN RVX

Last Week in Emerging Market Volatility – 3/9/2014

The emerging market space took a hit early in the week as the Russia weighting of just over 5% led to a drag in performance for the iShares MSCI Emerging Markets ETF (EEM – 39.52).  Out of curiosity I checked out the country weightings for EEM on the iShares website.  The weightings for the top 10 countries in the index appear in the table below.

EEM Weightings

 

Monday VXEEM was higher by as much as 15% before finishing the week slightly higher as tensions eased and EEM recovered.  The story continues to be mixed as far as Brazil goes.  The iShares Brazil Capped ETF (EWZ – 40.32) was down 1.63% on the week and VXEWZ was dramatically higher based on a wide variety of factors.  The VXEWZ futures are at a pretty significant discount to the index which may mean the time for VXEWZ in the low 30’s is not expected to be extensive.

VXEEM VXEWZ

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