VIX Last Week – 6/29/2014

After a few dips the S&P 500 managed to put up a slight gain last week. We have been through months of small sell offs consistently rebounding and the pattern seems to be repeating. This repetition has changed a little, with smaller market dips and quicker rebounds. Those of you that saw what the S&P 500 did in reaction to the GDP report last week know what I’m talking about.



The VIX curve twisted a bit as the index rose and all the futures lost value last week. VIX really didn’t have much room to drop on the downside, so a gain was probably inevitable unless the S&P 500 rallied strongly last week (which it didn’t).


Friday afternoon the floor was pretty quiet which is status quo when the Cubs are in town and the markets aren’t doing much. However, there was a bullish VIX trade that caught my eye with about 90 minutes left in the trading week. There was a buyer of the VIX July 13.50 Calls at 0.61 that sold the VIX July 17.00 Calls at 0.27 and a net cost (sans commissions) of 0.34. This trade gave me two opportunities, first to show how someone is getting relatively cheap long volatility exposure using VIX options. The other opportunity is to point out that the front month VIX options have strikes in 0.50 increments. This is a fairly new development in VIX trading. The payout at expiration for this VIX July 13.50 / 17.00 Call Spread appears below with Friday’s VIX and July VIX futures closing prices highlighted on the diagram.

VIX 13.50 - 17.00 PO

Russell 2000 and Nasdaq-100 Volatility Last Week – 6/29/2014

The NASDAQ-100 rose over 1% last week and VXN dropped by about 2%. The VXN reaction may have been a bit more dramatic if we weren’t already at pretty depressed volatility levels. Also, other broad based market indexes were not as resilient last week which may have kept VXN from dropping further.


The Russell 2000 is still lagging in 2014 and the 0.09% gain last week did not help the RUT play catch up to the S&P 500 or NDX. Based on Russell 2000’s lagging performance RVX has remained a relatively high level when compared with VIX and the 4% gain in RVX last week placed RVX at more than a 5 point premium to VIX which is well above the 2013 average spread.


The different performance of VXN and RVX last week carried over to their respective term structure curves as well. VXN has a fairly parallel shift downward while the rise in the spot RVX index was not reflected in gains for any of the three futures which all lost value last week.


Gold and Oil Volatility Last Week – 6/29/2014

It appeared that things were not getting any worse in Iraq (or anywhere else that oil comes from last week) and the results was a lack of follow through to the upside for oil futures and the United States Oil Fund (USO – 38.98). That sort of price action following a run up in the price of oil usually results in a little compression of implied volatility of the associated option prices. That’s exactly what we got last week in the CBOE Crude Oil ETF Volatility Index (OVX – 16.44).



With a few exceptions the price of gold has been in a fairly defined range for some time. More often than not means that the SPDR Gold Shares (GLD – 126.66) has closed in the 120’s over 80% of trading days in 2014. For those keeping score the exact number is 102 of the 123 trading days in 2014. The chart below shows GLD this year for a visual interpretation.

Gold Weekly 2014

With GLD mostly range bound the implied volatility of options on GLD remains at relatively low levels. GVZ drifted lower last week which has become a regular pattern in 2014.


The curves show a little divergence these days. The GVZ curve seems to indicate more of the same with respect to a lack of volatility. The OVX curve shows a little extra risk being priced in when focusing on the July futures. That contract expires on the open July 16th so time will tell if the extra premium in the July contract is justified or not.


VXST Last Week – 6/29/2014

The equity market and VXST both finished the week slightly changed, but did experience some intra-week movement. Note below that VXST almost broke below 9.00 on Monday putting in a low of 9.03. This 9.03 print is the lowest price recorded for VXST since we started keeping up with intra-day data back in November of 2013.



The curve was showing some concern regarding the employment number over the past couple of week, but that concern seems to have subsided a bit. Focus on the July 9th data point below and note that the July 9th contract was at a premium to all other contracts a week ago, but that is no longer the case. With Thursday’s shortened session and June employment number we’ll see if the sudden change in attitude is warranted or not.

VXST Curve

Volatility Indexes and ETPs Last Week – 6/29/2014

The volatility term structure as indicated by VXST, VIX, VXV, and VXMT twisted a little last week with the 9-day and 30-day volatility indexes rising and 93-day and 184-day indexes dropping a little. Near term risk rising may be attributed to the S&P 500 having a couple of scary days last week. Of course as it has been prone to do over the past couple of years, the S&P 500 shook off weakness quickly and regained some upside momentum. It’ll be interesting to see how VXST and VIX react when the S&P 500 finally does not bounce back.



VIX rose slightly and VXX was lower last week. This sort of price action always prompts the question, “Why?” Well the answer is that the performance of VXX is based on the performance of a VIX related strategy which owns the front two month VIX futures contracts. For instance, on Friday VXX was 56.30% July VIX futures and 43.70% August VIX futures. Both those contracts were lower last week which resulted in VXX losing value as well. Conversely, not that SVXY and XIV were higher last week. Those two funds actually have short positions in the respective VIX futures contracts.

VIX Index ETPs

Emerging Market Volatility Last Week – 6/29/2014

The iShares MSCI Emerging Markets ETF (EEM – 43.35) paid its first dividend in some time last week. Despite paying out some profits to holders of the fund there was very little movement in EEM volatility as indicated by the CBOE Emerging Markets ETF Volatility Index (VXEEM – 14.91) which finished the week dropping just over 1%. VXEEM PA


The CBOE Brazil ETF Volatility Index (VXEWZ – 24.00) was lower by over 4% even though the iShares MSCI Brazil Capped ETF (EWZ – 48.11) finished the week down about 1% after adjusting for a pretty hefty dividend payout.


The curves tell a couple of different stories. The VXEEM curve shift was pretty tame and ‘normal’ while the VXEWZ curve displayed a little bit of a twist. The VXEWZ September futures rose slightly and the curve steepened. It just may be that despite the strong performance out of the Brazilian market in 2014 there are some concerns about that streak continuing into the end of the 3rd quarter.


CBOE SKEW Index Rose to 143.26, Its Highest Level Since 1998 – By Matt Moran

The median of the daily closing values of the CBOE Volatility Index® (VIX®) so far this year has been 13.7, which is below the long-term median value of 18.3 for the VIX since 1990. The fact that the VIX lately has been below its long-term median has led some people to ask whether there now is too much complacency in the markets. However, in the charts below, the SKEW Index and the SPX volatility skew could suggest that some investors are not complacent at all, and there is strong demand for out-of-the-money (OTM) protective puts on the S&P 500® (SPX) Index.

This past Friday (June 20) the CBOE SKEW Index rose to 143.26, its highest level since Oct. 16, 1998.


CBOE SKEW Index values, which are calculated from weighted strips of out-of-the-money S&P 500 options, rise to higher levels as investors become more fearful of a “black swan” event — an unexpected event of large magnitude and consequence. The value of SKEW increases with the expected tail risk of S&P 500 returns. If there were no tail risk expectations, SKEW would be equal to 100. Historically, SKEW has varied in a range of 100 to 147 around an average value of 115.

The FAQ on the CBOE SKEW Index notes that –

“The price of S&P 500 skewness is inconvenient to use directly as an index because it is typically a small negative number, for example -.8, -2.3, or -4.3. SKEW converts this price as follows: SKEW = 100 – 10 * price of skewness. With this definition, a price of -2.1 translates to a SKEW value of 121. S&P 500 options with 30 days to expiration are generally unavailable. SKEW is therefore interpolated from two “SKEW” values at the maturities of nearby and second nearby options with at least 8 days left to expiration.”

CNBC recently posted a new blog on the “Back Swan” Index.


The chart below shows Bloomberg’s estimates for 30-day implied volatility at different strikes for AAPL, USO and SPX options. The implied volatility for some key index options that could be used for disaster protection fr stock portfolios – the out-of-the-money (OTM) SPX puts – was higher than the implied volatility for the related at-the-money (ATM) index options. Bloomberg’s estimates of 30-day implied volatility included 21.1 for 10% OTM SPX puts and 9.9 for ATM SPX options. The fact that the SPX chart below had such a negative slope was closely related to the fact that the CBOE SKEW Index recently hit its highest point in more than a decade.

Vola Skew AAPL USO SPX Jun 25


The VIX and other volatility indexes can be very valuable tools for investors, as the indexes are well-known, numerical gauges that show changes in expected volatility over time. Investors can now use a number of volatility indexes — (1) the new CBOE Short-Term Volatility Index (VXST), (2) CBOE Volatility Index (VIX), and (3) CBOE 3-Month Volatility Index (VXV) — to gain an understanding of expected volatility of the S&P 500 over different time periods, and can use the VVIX Index for expected volatility of the popular VIX Index.

However, none of these volatility indexes gives investors much information regarding the fact that implied volatility can vary across different strike prices. The CBOE SKEW Index can provide valuable information and signals to investors above and beyond the information supplied by the VIX Index. The SKEW Index could be helpful to both hedgers and traders in identifying times in which OTM SPX puts are relatively expensive compared to ATM options. The SKEW Index could be a valuable informational tool to investors who are considering engaging in the vertical spread strategy, an options trading strategy with which a trader makes a simultaneous purchase and sale of two options that have the same expiration dates and same underlying security but different strike prices. Hedgers who contemplate the purchase of SPX OTM protective puts can use both the VIX and SKEW indexes to gain a better idea of the relative cost of the strategy.

The CBOE SKEW Index provides valuable historical and up-to-date information to investors and hedgers, and can serve as a great complement to the CBOE’s volatility indexes. More information and price history is at

VIX Futures Now Round-the-Clock, as ETH Volume Tops 1.68 Million Y-T-D — By Matt Moran

Futures on the CBOE Volatility Index® (VIX®) now are available nearly 24 hours a day, five days a week (see below for more details). Trading volume for VIX futures during Extended Trading Hours (ETH) has topped 1.68 million contracts so far in 2014.

The charts below show key daily values in 2014 that you could compare – the VIX daily closing values, the 30-day historic volatility of the S&P 500® Index, and the daily volume in VIX futures during ETH.

VIX and ETH Jun 23

Since January 1990, the long-term average of daily closing values of the VIX is 20.1, and the long-term median value of daily closing values of the VIX is 18.35.

On June 23rd –

  • the VIX Index closed 10.99,
  • the VIX Sept. ’14 futures closed at 14.60,
  • the 30-day historic volatility of the S&P 500 Index was 6.89, its lowest daily value since January 2011.

For investors who want to lock in stock market gains and who think that in the near future the VIX could rise substantially with a correction in stock index values, strategies that could be explored include long VIX futures, long VIX call options, and protective puts with SPX options.
Beginning on Sunday, June 22, 2014 at 5:00 p.m. for the business day of Monday, June 23, CBOE Futures Exchange, LLC (CFE) is expanding trading hours in CBOE Volatility Index (VIX) futures to be nearly 24 hours a day, five days a week. Specifically, the trading week for VIX futures now begins on Sunday at 5:00 p.m. and ends on Friday at 3:15 p.m. CFE will be closed for trading on Monday through Thursday for 15 minutes between 3:15 p.m. and 3:30 p.m. and trading for the new business day will begin at 3:30 p.m. on Monday through Thursday. CFE will close at 3:15 p.m. on Friday and will remain closed until 5:00 p.m. on Sunday, when the new trading week will begin. Regular trading hours in VIX futures will continue to be from 8:30 a.m. to 3:15 p.m. Monday through Friday and trading in VIX futures during all other times will be extended trading hours.

For more information and delayed price quotes, please visit and

SPX Historic Volatility Falls To 6.89, Its Lowest Level Since Jan. 2011 – By Matt Moran

JUNE 23, 2014 – Today the 30-day historic volatility of the S&P 500® (SPX) Index fell to 6.89, its lowest level since January 2011, according to Bloomberg calculations.

VIX SPX Hist Vol 2010

Chris Dietrierich of the Wall Street Journal wrote –

“… The Dow Jones Industrial Average has gone 32 months without a 10% decline, the fifth-longest run on record. The S&P 500 hasn’t closed up or down 1% in 46 days, the longest stretch since 1995. Yet the number of outstanding options contracts that profit from a rise in VIX futures ended Wednesday at its highest level since January’s all-time high, at 8.1 million …”

Some investors have asked if the CBOE Volatility Index® (VIX®) Index recently has been at unusually “low” levels. Since January 1990, the long-term average of daily closing values of the VIX is 20.1, and the long-term median value of daily closing values of the VIX is 18.35.

On June 23rd –

  • the VIX Index closed 10.99,
  • the VIX Sept. ’14 futures closed at 14.60,
  • the 30-day historic volatility of the S&P 500 Index was 6.89.

So while the VIX Index at 10.99 is below its long-term median value, the historic volatility of the S&P 500 Index (at 6.89) is quite a bit lower than the VIX Index. The S&P 500 Index has been on a pretty smooth upward ride, and one could say that VIX is not particularly “low” if it is more than 4 points higher than 30-day historic volatility. For investors who want to lock in stock market gains and who think that in the near future the VIX could rise substantially with a correction in stock index values, strategies that could be explored include long VIX futures, long VIX call options, and SPX protective put options. This is the first week that VIX futures are available nearly 24 hours a day, five days a week.
For more information, charts and delayed quotes, please visit and

Last Week in VIX – 6/22/2014

VIX is low. That could be the end of the blog, but there is more to it than just saying VIX is low. Please note I didn’t say ‘too low’ since there is no such thing. If the VIX tourists know that with the S&P 500 continuing to defy all skeptics and pushing higher VIX is toying with putting up a sub 10 price that would result in a blog in this space discussing what happened after VIX closed below 10 back in the day (2007).


The July VIX future at 12.90 is more startling to me than VIX closing at 10.61 on Wednesday of finishing the week at 10.85. Selling a VIX future that has 16 trading days remaining until settlement under 13.00 is kind of a scary prospect, regardless of where the spot index is being quoted.


Finally, I almost forgot to mention the big event come Sunday night (no not Soccer) VIX futures will begin trading at 5:00 for the launch of trading almost 24 hours a day.  If it is past 5:00 Chicago on Sunday you can go to and see what VIX futures are doing in their first session to match up with Asian market hours.


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