12 Key Stats Re: VIX Index — By Matt Moran

In the recent August 16 Striking Price column in Barron’s, Steven Sears authored a piece entitled “A New Vision of VIX” that noted –

“Over the past 21 years, the CBOE Volatility Index, or VIX, has emerged as one of Wall Street’s most watched sentiment indicators. … Krag “Buzz” Gregory, a Goldman strategist, found that U.S. consumer spending, manufacturing, and employment data explain 57% of the variability in VIX levels back to 2000. …Gregory told clients that the options market is engaged in a tug of war between a strengthening U.S. economy and menacing geopolitical concerns. Against this battle between the constructive and destructive, the VIX has averaged 16.3 in August, versus a year-to-date average of 13.7. …”

The column noted that there are “widespread worries that investors are too complacent or somehow missing the larger picture.” Some observers have questioned whether the CBOE Volatility Index® (VIX®) has been low in light of overseas tensions, while other commenters have noted that the historic volatility of the S&P 500® Index generally has been even lower than the VIX Index throughout most of this year.

We see and hear many comments and questions on the popular VIX Index and related products; here are twelve key stats —

RECENT STATS re: VIX Index

13.6 – Average daily closing value for VIX in 2014 (year-to-date)
10.4 – Average historic volatility for S&P 500 (SPX) Index in 2014 (year-to-date, see graph below)
12.32 – VIX Index closing value on Aug. 18
17.30 – settlement value for VIX April 2015 futures on Aug. 18

LONG-TERM STATS re: Daily Closing Values of VIX (Jan. 1990 – Aug. 15, 2014)

18.28 – Median daily closing value of VIX
20.03 – Average daily closing value of VIX
80.86 – Highest daily closing value of VIX (on Nov. 20, 2008)
9.31 – Lowest daily closing value of VIX (on Dec. 22, 1993)

VOLUME-RELATED STATS

0.36 – put/call ratio for VIX options in 2014 (through July), with total volume of 25,951,739 VIX put options, and 71,454,856 VIX call options (buyers of VIX call options have the potential to profit if VIX futures prices rise sharply)
640,264 – average daily volume for VIX options this month (through August 15)
292,683 — average daily volume for VIX futures this month (through August 15)
159,498 – average daily volume for VIX futures in 2013 (the highest total for any full calendar year)

VIX Aug 18

For those investors who wonder if VIX is “too low” or “too high” relative to their own views of the market, VIX futures and options now offer investable instruments to implement investment strategies.  You can visit www.cboe.com/VIX to learn more about investing in VIX futures and options.

Volatility Indexes and ETPs Last Week – 8/17/2014

Volatility came back down to what is considered ‘normal’ levels for 2014, but there was a slight twist. Note that on Friday VXST closed at a slight premium relative to VIX. I was hosting a VIP tour in the last hour of trading on Friday and things were pretty active as the S&P 500 worked back up to about unchanged after a pretty interesting day. I was talking to one of the guys in the SPX Pit and commented, “It feels like no one wants to go home short volatility this weekend.” His response, “Nobody wants any positions over this weekend.” So far the shooting in Ukraine hasn’t increased, but the weekend is still not over.

VXST VIX VXV VXMT Curve

The long oriented exchange traded products took it on the chin last week as the August VIX future dropped 17% and September was down 14%.   The long products are very heavily weighted to September as August futures come off the board this week.

Index and Options Table

Finally we can take a quick look at a bullish VXX option trade that I saw on Thursday. There was a seller of over 24,000 VXX Oct 25 Puts that took in 0.68. VXX finished the week at 28.88 so this trader expects a couple of bullish moves out of VXX over the next couple of months. I do not agree or disagree, but will note that September and October are months that have people a little more on edge based on history.

Russell 2000 and Nasdaq-100 Volatility Last Week – 8/17/2014

The Nasdaq-100 rose over 2.5% last week. Over 20% of NDX’s performance is based on two stocks – Apple (AAPL – 97.98) and Microsoft (MSFT – 44.79) – both of which rose about 3.5%. Whatever the reason, NDX was strong and VXN was over 20% lower on the week.

VXN PA

 

The Russell 2000 was the laggard of the three broad based indexes that have volatility trading available and was higher by just under 1%. For comparison sake, the S&P 500 rose 1.22% last week. RVX continued to narrow the gap with VIX dropping 2.88 while VIX was down 2.62. The first half of 2014 was not good to small caps relative to other market sectors and RVX was elevated relative to VIX. Over the past couple of weeks the spread has narrowed which can be taken as the market saying the small cap underperformance may be a thing of the past.

RVX PA

There are only two trading days remaining until August volatility futures and options expire on the open this coming Wednesday. The premium of the August VXN contract relative to the index (0.48) sort of caught my eye, especially since VXN was down so much last week. It will be interesting to see if the futures premium has it right which would me VXN moves up a bit over the next couple of days. The story is the same with RVX, but there has been a higher risk perception for small cap stocks so that one doesn’t surprise me as much as the VXN futures premium.

VXN RVX FUT

Emerging Market Volatility Last Week – 8/17/2014

The emerging market sector continues to perform well in 2014. This performance comes in spite of the iShares MSCI Emerging Markets ETF (EEM – 44.51) having about 5% of the fund exposed to Russia. EEM rose about 1.8% last week which places the fund up more than 7% for the year. VXEEM dropped over 14% based on the strong week.

VXEEM PA

 

Brazil is the star of the emerging market sectors this year. The iShares Brazil Capped ETF (EWZ) was up a hair shy of 3% last week and finished the week 12.81% higher for 2014. Despite the strong performance VXEWZ was down less than a point last week. There was a tragedy on Friday where one of the leading candidates for president was killed in a plane crash which rattled VXEWZ a bit.  I posted a blog in this space about the market impact of that plane crash earlier last week –

http://www.cboeoptionshub.com/2014/08/14/volatility-brazilian-markets-yesterday/

I’ll discuss the other reason VXEWZ remains elevated in the discussion of the curves below.

VXEWZ

VXEEM shifted to have more of a contango appearance with the index moving lower. The more interesting curve story comes from VXEWZ. This curve is fairly elevated with September and October futures and then the November price is at a discount to the other two. On October 5th Brazil may elect a new president, unless the old one is re-elected. The markets are showing some real uncertainty regarding the potential outcome and may continue to do so until the results are announced. This is going to be something I’ll keep a close eye on until early October.

VXEEM VXEWZ FUT

Short-Term Volatility Last Week – 8/17/2014

VXST was displayed the expected amount of calm over a week where the S&P 500 rose over 1%. The only real excitement came via a little noise on Friday morning. After a bit of a swoon and by the end of the day the S&P 500 was almost unchanged. I guess the time frame for recovery from international events is now down from a day or two and can be measured in hours.

VXST PA

The VXST curve moved in sync with the index and shifted lower. The September 10th contract started trading on Thursday and I was really looking forward to seeing how that contract was priced relative to the other futures. The monthly employment number that always catches the attention of the investment world comes out on September 5th so the relative pricing of the September 10th contract can be an indication of how the market is discounting the risk of a big move around this economic report. It appears from the curve below that traders are more concerned with the last few weeks of summer than what may come from the jobs report.

VXST FUT

Gold and Oil Volatility Last Week – 8/17/2014

The price action for the oil and gold markets, along with their respective volatility indexes is inerrable when the state of the world is taken into consideration. Even a looming shooting war between Russia and Ukraine doesn’t do much for the price of oil, gold, or implied volatility of either markets.

Friday things started to get a bit interesting, but died off as the afternoon approached. Note that GVZ tried to reach for higher levels on the week, but just couldn’t hold on.

GVZ PA

 

The price of oil seems to have no geopolitical concerns at all.   I have a hard time buying the thought that Oil is down due to a slow economy, the numbers just don’t show that.

OVX PA

Looking at the curves, GVZ seems to believe that price action will continue to be relatively dormant which the bump in the September and October OVX futures relative to the index make me wonder if some traders are bracing for a price shock (could be higher or lower) in the next couple of months.

GVZ OVX FUT

VIX Last Week – 8/10/2014

VIX was lower on the week by about 7%. However, from the close Monday to Friday VIX actually worked a bit higher and without Friday’s very impressive rally VIX may have finished the week higher. Looking at the chart below I find the highs on Thursday and Friday pretty interesting.   The highs surpassing last week’s close  show some market concern during the day, but calm took over before they turned the machines off for the weekend.

VIX PA

The VIX curve only had one big mover and that would be the index. The futures discounted a move lower for VIX and for the umpteenth time in three years the futures got it right. Speaking of three years, I found it interesting that no one seemed to mention Friday was the three year anniversary of the last real ‘volatility event’ on 8/8/2011 – on that day the S&P 500 dropped 6.66% (you can’t make some things up) and VIX went from 32.00 to 48.00.

VIX

On Thursday there was an interesting August option trade that came in mid-morning. Someone bought 12,000 VIX Aug 16 Puts, sold 12,000 VIX Aug 15 Puts and then sold 24,000 more VIX Aug 14 Puts receiving a credit of 0.12. Let’s just say someone is really hoping for VIX settlement to come in right at 15.00 on August 20th.

VXST Last Week – 8/10/2014

The combination of the S&P 500 not following through on the downside after the previous week’s slide and no significant economic event on the horizon for the near term resulted in a pretty big drop in VXST this past week. The index came in from over 19 to the mid 15 level and finished the week at a slight discount to VIX.

VXST PA

I am the first person that admits when they do not know something and when I see flat volatility curves I really do not have a consistent explanation as to how they should be interpreted. Maybe if I’m uncertain what it means, that is how it is to be interpreted, the market is in a bit of flux wondering if the S&P 500 has another all-high in it, or is the long expected (by market pundits) correction finally beginning.

VXST

Last Week in Volatility Indexes and ETPs – 8/10/2014

I liked the chart below so much I tweeted it before I wrote anything about it. Last week the indexes that measure different implied volatility periods based on the SPX option trading came back to the comforting contango shape we are all so used to. The shape is ‘normal’, but since volatility should be looked at relative to recent history I thought adding a third curve that displays the average closing prices for VXST, VIX, VXV, and VXMT in 2014 was worthwhile. The shape is normal, but the risk levels are still elevated relative to most of this year. VXST VIX VXV VXMT Curves

 

In the ETN space the funds that based their performance on VIX futures strategies were higher despite a drop in VIX.   We can attribute that to the September VIX future rising (slightly) last week. September is now the dominate contract for VXX and was 72% of the strategy as of Friday last week.

Option ETN Table

Finally, I came across a trade from Friday in VXX where someone does not think we are done with higher volatility in August. There was a buyer of 10,000 VXX Aug 29th 30 Calls at 4.90 who also sold 10,000 of the VXX Aug 29th 33 Calls for 3.00 which comes to a net cost of 1.90. The best case for this trade is VXX at or above 33.00 on the close on Aug 29th where the trade will turn a 1.10 profit. With VXX closing at 33.21 on Friday I would say the expectation is based on another volatility spike or two between now and late August.

Last Week in Gold and Oil Volatility – 8/10/2014

Oil futures remained below $100 and despite frightening things going on in the world there seems to be very little geopolitical risk premium showing up in the price of oil or options that are based on the oil market. OVX basically worked lower over the course of the week.

OVX Price Action

This past week was a busy one at The Options Institute. We bid farewell to the best group of interns I have worked with in my five years at CBOE and we also hosted a class of college students for our late summer Investing and Trading for College Students class. When we have busy weeks I do not get to keep an eye on the markets. I did see some headlines discussing higher gold prices and was surprised to see that GLD remains in the 120.00 to 130.00 range despite some headline hype. I think it is going to take a break over 130.00 or a move under 120.00 to really catch the interest of GVZ.

Gold Weeklys 08082014

 

With GLD remaining range bound GVZ was pretty dormant as well, closing lower on Monday and then grinding higher as the week goes along.

Gold Price Action

Finally, the curves both moved in a pretty uniform pattern last week, with GVZ and respective futures moving higher and OVX and respective futures dropping on the week.

GVZ OVC

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