On Election Eve, Volatility Indexes for Stocks, Gold, Currencies & Volatility Fall By More than 8% (after Record 9-Day Up-Streak)

NOV. 7 – Last week I heard about quite a bit of new interest in portfolio protection strategies, and on November 4 the CBOE Volatility Index® (VIX®) rose on a ninth consecutive day (a new all-time record for the VIX Index over its price history dating back to January 1990).

However, today (the date before the U.S. national elections), the S&P 500® Index rose 2.2%, and the percentage changes for some key volatility indexes were as follows:

  • -16.9%             VIX                  CBOE Volatility Index
  • -14.5%             EUVIX             CBOE/CME FX Euro Volatility Index
  • -12.3%         VXEFA            CBOE EFA ETF Volatility Index
  • -10.3%             VVIX                CBOE VIX of VIX Index
  • -8.4%         GVZ                CBOE Gold ETF Volatility Index
  • 2.4%          TYVIX             CBOE/CBOT 10-year U.S. Treasury Note Volatility Index

Visit www.cboe.com/volatility for values and prices changes for more than two dozen more volatility indexes.


Below are price charts showing daily closing values for four volatility indexes over the past eleven trading days. It appears that FBI announcements (on Friday, October 28, and on Sunday, November 6, regarding the status of their investigations of Hillary Clinton’s emails) had an impact on key volatility indexes.




The next chart below show the Livevol estimates for the volatility skew for VIX options at the close today (when the VIX Index was priced at 18.71. Note that the implied volatility estimate for the VIX 20 calls expiring this Wednesday was 330 (much higher than the estimates for implied volatility for VIX calls that expire on the following Wednesdays).



 To learn more about managing your portfolio with index options, please visit the Strategies and Education tabs at the CBOE website.

Qualified institutional investors also are welcome to register at www.cboermc.com for an upcoming Risk Management Conference hosted by CBOE –

  • RMC Asia 2016: Nov 30 – Dec 1, 2016 at the Conrad Hong Kong Admiralty, Hong Kong, and
  • RMC US 2017: Wednesday – Friday, March 8 – 10, 2017 at the St. Regis Monarch Beach, Dana Point, California.

Volatility History Lesson – The 2012 Election

I’ve been getting lots of questions with respect to how volatility acts around US elections.  We don’t have a lot of history to work with, but we do have data on how the four volatility indexes based on SPX option trading did four years ago.  I did a little digging and reconstructed the VXST – VIX – VXV – VXMT curves from the Friday before and Friday after the 2012 election.



The pre-election curve was slightly inverted with VXST at a premium to spot VIX.   The week of the election VXST dropped 0.01 while the rest of the curve moved higher.  This was a result of the S&P 500 dropping about 2.5% during the week of the election.  Most likely the shift of risk from the election to a drop in the stock market kept VXST basically unchanged.  Short dated volatility was most reactionary to the 2012 election and is behaving the same way before the 2016 election, although at more of an extreme this time around.   Short term volatility will most likely fall back in line with the rest of the curve after the election is past us, however, the levels of VIX, VXV, and VXMT will be determined by the outcome of the election this coming week.

The Election and Sector Volatility

So, last week I looked at the implied volatility of various option markets that expired just before and just after next week’s election.  You can read all about that here.  Of course, as we all know, things changed a bit last Friday.  When things change, I start running numbers.  First I updated the table from last week where the IV for Nov 4th and Nov 11th options were compared for a variety of sectors, indexes, and one country fund.


The top part of the table above compares the implied volatility for the S&P 500 (SPX), Nasdaq-100 (NDX), and Russell 2000 (RUT).  The implied volatility for Weeklys expiring just after the election is at a 33% premium for SPX options, 24% for the RUT, and about 21% for NDX.

Note that EWW implied volatility is 77% higher for the November 11th options when compared to the November 4th contracts.  This was the highest of the fund premiums last week as well.  The second and third funds on this table represent healthcare and those funds were in the same place last week.

I also looked at the change in November 11th volatility between the close on 10/25 and the close yesterday (10/31).  Those changes appear below.


The broad-based index volatility rose between 32% and 36% which was surprisingly consistent.  For the sector funds, health care volatility rallied more than EWW volatility.  I could understand this with respect to XLV, since November 11th IV was less than half of that for EWW last week, but Biotech volatility was already higher than EWW so the 60% move is nothing short of impressive.

We have (hopefully) just over a week until this election is behind us.  I’m going to closely watch market volatility, both broad based index and sector fund, to see where the market sees post-election risk and continue to report back in this space.

Weekend Review – VIX Futures and Options – 10/30/2016

VIX had a pretty stellar week, aided by the new on Friday, to finish over 20% higher. Spot VIX may be buying into a new scandal, but the futures did not.  The curve is as flat as it has been in months which tells me traders expect this move in VIX to be short lived.



We are all aware that VIX made a little move on Friday as new of a new chapter in the Clinton email saga commenced.  As the week came to an end on trader took advantage of a rise in VIX and the December futures contract to place a pretty basic trade.  With VIX at 16.19 and the December contract at 17.05 there was a buyer of just over 4,000 VIX Dec 16 Puts for 1.45.



I know that’s short of exciting, but the December futures always are a bit of an anomaly based on holiday calendar.  We have Christmas, New Year’s, and MLK holidays between December VIX settlement and the S&P 500 options that determine the settlement price.  It may be a trader has been waiting to pounce and purchase Dec puts.  Friday’s new reaction may have given them that opportunity.

Weekend Review – Volatility Indexes and ETPs – 10/30/2016

As a good number, but not all (some of us are White Sox fans) of the traders on the floor at CBOE were starting to think about where they were going to be that evening to watch Game 3 of the World Series, some news broke that shook the equity markets.  I don’t need to regurgitate all that here.  In fact, regurgitate is a good word to describe the election process this year.



The curve below is partially a result of the uncertainty around the election, but also reflects a relationship that I think would have existed with or without the newest twist to the election.  Note the purple box below highlighting the difference between VXST and VIX with VXST at a slight premium.  This time last week VXST was calculated using October 28th and November 4th options.  Now, VXST includes options expiring the Friday after the election. We will never know exactly how much of a boost that gave to VXST, but it must count for something.

I’ve already noted the VXST performance from last week.  Other things that stand out are a rebound in  TYVIX after dipping below 4 last week and the bump up in VVIX which settled under 100 after topping that figure on Friday.



Both VXX and UVXY had good weeks, but it is a little too little and a little too late as both funds have suffered from steep contango and low VIX for most of 2016.




Finally, a look at the 29 volatility indexes shows broad based volatility up across the board.  On the flip side, four of the five losers last week were individual stock volatility indexes.  Three of those were the result of earnings.  The other loser was volatility on the British Pound which has been very strong of late and was probably due for a rest.


VVIX Index Spikes 21% on News of Investigation – By Matt Moran

OCT. 28 – On Friday afternoon a news story at wsj.com noted that –

“Worries about a surprise election outcome resurfaced anew in financial markets on Friday afternoon after the Federal Bureau of Investigation uncovered new evidence in its investigation of Democratic presidential candidate Hillary Clinton‘s email server. … The news sent ripples through stocks, currencies and commodities in afternoon trading. The S&P 500 slumped to the day’s lows in recent trading and the CBOE Volatility Index, the market’s “fear gauge,” shot to its highest level in six weeks. …”


The CBOE VIX of VIX Index (VVIX) is an indicator of the expected volatility of the 30-day forward price of the VIX. www.cboe.com/VVIX. The prices of VIX options are used in the VVIX calculation. On Friday afternoon the VVIX Index had a quick rise of more than 21% to an intraday high of 106.66.



The popular CBOE Volatility Index® (VIX®) also spiked Friday afternoon. The VIX Index ranged from a low of 14.65 to a high of 17.35 during the trading day.


While many folks follow the VIX Index, volatility traders often focus more on tradeable instruments such as the VIX futures. The VIX November futures (expiring on Nov. 16) also spiked mid-day Friday, and during the Friday trading session (which runs more than 23 hours) the VIX November futures prices ranged from a low of 15.74 to a high of 17.08.


The S&P 500® Index (SPX) had a drop of about 20 points mid-day Friday, and for the entire day the index was down 6.63 points.


A Bloomberg report noted that “American equities erased gains and Mexico’s peso, which is seen as a proxy for market perception on the U.S. vote, declined against most major currencies. …”



Visit the Product Specific Strategies section of the CBOE website to learn more about how index options can help you manage your investment portfolio in times of market uncertainty.

Sunday Night Trading of VIX and Stock Index Futures and Currencies During the Presidential Debate – By Matt Moran

October 9, 2016, 11:50 pm CT — Regarding the financial market movements Sunday night around and during the second presidential debate, below are some highlights.


Trading volume for futures on the CBOE Volatility Index® (VIX®) on Sunday night from 5:00 p.m. through 11:15 p.m. exceeded 2,250 contracts.

The chart below shows that the Sunday night prices for the October VIX futures (with an expiration date of October 19) were down 0.345 points at around 9:55 pm C.T. (when compared to the Friday night close).


The table below shows the 14 tickers and expiration dates for VIX futures.



A CNBC story stated that —

“… No clear winner emerged from the second U.S. presidential debate Sunday night, based on several analysts’ interpretation of market reaction — or lack thereof. … .U.S. stock index futures held slightly higher near earlier levels throughout the entire debate. S&P 500 futures were about 5 points higher and Dow Jones industrial average futures were about 31 points higher, as of 11:08 p.m. ET.”           


A Bloomberg news story noted that —

“… Mexico’s peso pared its climb after Donald Trump and Hillary Clinton sparred in the second presidential debate. Crude extended losses and the yuan weakened to a six-year low.  The peso, seen as a bellwether for traders’ views on Trump’s prospects, added as much as 2 percent as the Republican candidate was questioned about a video in which he talked about women in vulgar terms, before trimming gains to 1.4 percent after the debate concluded …”


Please visit the VIX microsite at www.cboe.com/VIX for more information on VIX futures and options.

For an earlier blog that discusses market movements during the first presidential debate, please visit http://bit.ly/VIX-debate.

Will VIX Futures Prices Move During the Sunday Night Debate? – By Matt Moran

OCTOBER 7. 2016 – On the night of September 26 a debate-record 84 million people tuned in to watch the first of three U.S. Presidential debates. During the debate there were movements in the prices of futures on the CBOE Volatility Index® (VIX®), S&P 500® futures, and the Mexican peso (see below for a chart and more information).

If you would like to follow the movements of VIX futures during the upcoming Presidential debate on from 8:00 to 9:30 p.m. CT this Sunday, October 9, here are three resources for you –


The trading hours for VIX futures begin at 5:00 p.m. Chicago time on Sundays, and VIX futures are offered more than 23.5 hours a day during the trading week Last month the average daily volume for VIX futures during extended trading hours (from 3:30 p.m. to 8:30 a.m.) was 31,901 contracts. www.cboe.com/ETH.



At around noon Chicago time on Friday, October 7, the VIX Index spot price was 13.88, and the VIX futures prices are shown in the table below.



During the first presidential debate on September 26 (from 8:00 to 9:30 p.m. CT) –

  • VIX futures prices fell,
  • S&P 500 futures prices rose.
  • Mexican peso rose in value (vs. U.S. dollar).

As shown in the chart below, during the 90 minutes of the first debate, the VIX October futures fell by about 0.50 points. (Please note that the new trading day for VIX futures usually starts at 3:30 p.m. the previous calendar day, and so on the calendar night of September 26, the September 27 trading day already had begun).


A 1290-word analysis by Professor Justin Wolfers of the University of Michigan noted that —

” … During the debate, the overnight [stock index] futures markets rallied, raising the value of broad stock market gauges like the Standard & Poor’s 500-stock index by two-thirds to three-quarters of a percentage point. This was a consequential move, … the rally occurred between 9 and 11 p.m. on a Monday, typically a fairly tranquil time and, in this case, a stretch in which there was no other important economic or financial news. … the rise in stock prices was unusually large for that particular time period — larger than during the same window on all but one of the 200 previous Mondays. It appears to be a statistically significant move … ”

Regarding the Mexican peso, a September 27 news story at http://money.cnn.com noted that —

“As Trump and Hillary Clinton sparred on live TV, one key financial barometer of the Republican nominee’s prospects started moving sharply: the Mexican peso soared more than 2% against the dollar. In recent weeks, the Mexican currency has been moving in the opposite direction to Trump’s poll numbers. As they have improved, the peso has dropped, hitting an all-time low against the dollar ahead of Monday night’s debate. Its sudden leap during the debate was a clear reaction to Trump’s performance, according to Ihab Salib, head of international fixed income at Federated Investors. …”


To learn more about the ways in which VIX futures and options can be useful tools in portfolio management, please visit www.cboe.com/VIX.

Weekend Review – Volatility Indexes and ETPs – 10/2/2016

The VXST – VIX – VXV – VXMT Curve is a consistent way to look at different S&P 500 Option Implied Volatility time frames.  All four indexes moved up a bit last week, with the curve shape maintaining a pretty steep shape.


The ETPs were a mixed bag last week.  VXX and the other long funds that focus on the short end of the curve were higher last week.  VXZ, which focuses on the longer end of the curve was lower, being a victim of the steep contango that has existed in the VIX curve for most of 2016.  SVXY and XIV were lower, but ZIV (inverse of VXZ) moved up a tad.


With nine months behind us, SVXY is up strong and both VXX and UVXY have had a tough year based on VIX at relatively low levels this year.


For the second week in a row individual stock implied volatility lead the charge higher with VXGOGL and VXAZN moving higher by over 20%.


Late Monday, with VXX around 35.60 and up 1.80 on the day a calendar spread came into the VIX pit using VXX options half the trade has expired as the VXX Sep 30th 37 Calls were sold at 0.71 and the VXX Oct 21st 37 Calls were purchased for 2.17 and a net cost of 1.46.  The first payoff diagram shows the result for the trade as of this past Friday.


Assuming no changes, the position is now long the VXX Oct 21st 37 Call at a cost of 1.42, which is a bit more than the cost of this call as of Friday.  The payout below is upon the option’s expiration and assuming that no other trades occur.  However, I wouldn’t be surprised if another shorter dated call is sold if VXX makes another move to the upside.


Weekend Review – VIX Options and Futures – 10/2/2016

The VIX curve did The Twist (cue Chuck Berry) as spot VIX rose 8% and the front month October contract was up by just over 1%.  Beyond the front month all things were red.


The highest closing level for VIX last week came on Monday with the spot index finishing the day at 14.50.  One trader had an expectation that this move up would very short lived and decided to sell a call spread with VIX Weeklys Options that expired on the open this past Wednesday.  Just a few minutes before the close there was a seller of the VIX Sep 28th 13.50 Calls at 1.17 who bought VIX Sep 28th 15.00 Calls 0.42 for a net credit of 0.75.  The payout diagram below assumes the trade was held through Wednesday settlement.


For those that are aware that the corresponding VIX futures pricing comes into play with respect to VIX options pricing I’ll add that the Sep 28th VIX Future closed last Monday at 14.60, basically in line with spot VIX.  The risk reward of this trade was a gain of 0.75 or a loss of 0.75 with the break-even at 14.25.  I highlighted Wednesday’s VIX settlement on the payoff diagram below which was safely below the short strike of 13.50 in this trade at 13.05.


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