New Single-day Volume Records for VIX Futures and VIX Options, as the VIX Index Rises 44.4%

An August 10 press release by CBOE Holdings stated that —

“ … trading volume in options and futures on the CBOE Volatility Index® (VIX®) each reached new all-time highs on Thursday, August 10. In VIX options at CBOE, a reported 2,562,477 contracts traded on Thursday, surpassing the previous single-day record of 2,382,752 contracts on February 3, 2014. Year-to-date through the end of July, average daily volume in VIX options was 687,181 contracts, 11 percent ahead of the same period a year ago. In VIX futures at CBOE Futures Exchange (CFE), a reported 939,297 contracts traded on Thursday, surpassing the previous single-day record of 791,788 contracts on October 15, 2014. Of the 10 busiest trading days of all-time for VIX futures, four have occurred in 2017. Year-to-date through the end of July, average daily volume in VIX futures was 283,342 contracts, 20 percent ahead of the same period a year ago.”

A story posted at nytimes.com noted that —

“… After a record-breaking run of buoyant market behavior, investors appeared unnerved on Thursday by a series of provocative remarks by President Trump and increasing tensions with North Korea. …”

BIGGEST ONE-DAY MOVES FOR VIX INDEX

On August 10 the VIX Index jumped 44.4% to close at 16.04. The move was the ninth-biggest one-day move (in percentage terms) for the VIX Index. Note that in the table below with ten dates that the S&P 500 Index fell farther than the CBOE S&P 500 PutWrite Index (PUT) on all ten dates, and that option-writing strategies often are designed to provide a cushion in the event of a downward move in the stock index.

 2 Biggest Moves VIX Table Aug 10 New Single day Volume Records for VIX Futures and VIX Options, as the VIX Index Rises 44.4% at vixtrade.com

 

OTHER VOLATILITY INDEXES ALSO ROSE ON AUGUST 10

As shown in the next table, several other volatility indexes also rose on August 10, including the CBOE Equity VIX on Apple (VXAPL) (up 22.4%) and the CBOE VIX of VIX Index (VVIX) (up 26.7%).

2Views Table indexes Aug 10 New Single day Volume Records for VIX Futures and VIX Options, as the VIX Index Rises 44.4% at vixtrade.com

RECORD OPEN INTEREST FOR VIX FUTURES

In addition to this month’s single-day volume records, the VIX futures set another new record with more than 675,000 open interest. VIX futures open interest has more than doubled since January 2016. I find it interesting to examine the table below with its comparison of VIX futures open interest and VIX Index values. While some observers assume that high volatility levels are  associated with high volume and open interest figures, in the chart it appears that at times VIX futures open interest increased when the VIX Index was well below its long-term average levels.

 4 VIX Fut Open interest and VIX index New Single day Volume Records for VIX Futures and VIX Options, as the VIX Index Rises 44.4% at vixtrade.com

VIX FUTURES PRICES

While there is much press coverage of movements of the spot VIX Index, the index is not investable. Investors who are interested in VIX-related investable instruments can explore the pricing of VIX futures. The table below shows that the last prices for VIX futures with 14 different expiration dates ranged from 14.75 to 17.45 at around 7:05 p.m. Chicago time on August 10.

VIX fut table New Single day Volume Records for VIX Futures and VIX Options, as the VIX Index Rises 44.4% at vixtrade.com

MORE INFORMATION

To learn more about how VIX futures and VIX options can help in the management of portfolios, please visit www.cboe.com/VIX.

 

 

 New Single day Volume Records for VIX Futures and VIX Options, as the VIX Index Rises 44.4% at vixtrade.com >

2017 is a Record-Breaking Year for Both SKEW-Over-145 and VIX-Under-10 Values

In recent weeks several news articles have noted that the CBOE Volatility Index® (VIX®) dipped below 10, and have asked if there is an unusual amount of complacency in the markets. The VIX Index closed below 10 on seven straight trading days (an all-time record) from July 13 to July 21. Recent headlines stated (1) “Too calm? Wall Street volatility collapses to lowest since 1993” (by CNBC), and (2) “Dip in volatility stirs warnings about too much complacency” (by Pensions & Investments).

IS THERE TOO MUCH COMPLACENCY IN THE MARKETS?

I believe that an argument could be made that the markets still are concerned about downside risk, and are not completely complacent in 2017, particularly if one looks at the statistics in three charts below: (1) the CBOE SKEW Index already has closed above 145 on 10 days in 2017 (more than any other calendar year); (2) a recent SPX volatility skew chart showed that the implied volatility estimates for many of the out-of-the-money put options ranged from 11 to 27, and (3) a recent VIX futures term structure chart showed VIX futures prices (with expirations at future dates) ranged from 10.35 to 16.

1 Table chart VIX SKEW 2017 is a Record Breaking Year for Both SKEW Over 145 and VIX Under 10 Values at vixtrade.com

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 tail risk of S&P 500 returns. If there were no tail risk expectations, SKEW would be equal to 100.

SPX VOLATILITY SKEW CHART – SHOWS DEMAND FOR DOWNSIDE PROTECTION

The volatility skew chart below shows the implied volatility estimates for SPX options at the close on Friday, July 21. On that date the closing values were 2472.54 for the SPX Index, 9.36 for the CBOE Volatility Index® (VIX®) (the second-lowest daily close for the VIX Index), and 134.53 for the CBOE SKEW Index (SKEW). The long-term average daily closing values since January 1990 are 19.5 for the VIX Index and 118.7 for the SKEW Index.

The SPX volatility skew chart below shows:

  • Expirations on 26 upcoming dates in 2017 (including Mondays, Wednesdays, and Fridays and end-of-months) are available for SPX options; and
  • The implied volatility estimates for at-the-money SPX options ranged from around 5 to 12, and the implied volatility estimates for many of the out-of-the-money put options (with strike prices from 2230 to 2404, and that can be used for downside portfolio protection) were often much higher, with a range from around 11 to 27. With the SKEW Index at 134.53, one can expect generally higher implied volatilities for out-of-the-money SPX put options, when compared with at-the-money SPX options.

2 Livevol vol skew SPX 2017 is a Record Breaking Year for Both SKEW Over 145 and VIX Under 10 Values at vixtrade.com

 

VIX FUTURES TERM STRUCTURE – RANGE FROM 10.35 TO 16

The VIX futures term structure chart is upward sloping and shows that the VIX futures prices ranged from 10.35 (for the July 26 expiration) to 16 (for the VIX futures expiring on February 14, 2018).

 3 VIX Term Structure July 23 2017 is a Record Breaking Year for Both SKEW Over 145 and VIX Under 10 Values at vixtrade.com

 

CONCLUSION

In order to gain a better sense of the amount of overall fear or complacency in the markets, analysts and investors can examine and compare many metrics, including the VIX Index, SKEW Index, volatility skew charts, and VIX futures term structure.

Links to more information on the SKEW Index, VIX futures and options, and more than 25 volatility indexes is at www.cboe.com/volatility.

 2017 is a Record Breaking Year for Both SKEW Over 145 and VIX Under 10 Values at vixtrade.com >

Award-Winning PUT Index Now Has 31-Year Price History with Strong Risk-Adjusted Returns

Over the past couple of years more investors have expressed interest in the cash-secured put writing strategy. The leading performance benchmark for this strategy is the CBOE S&P 500 PutWrite Index (PUT), an index that measures the performance of a hypothetical portfolio that sells one-month S&P 500® Index (SPX) put options against collateralized cash reserves held in a money market account.

HIGHER RETURNS AND LOWER VOLATILITY

Note in the bar charts that the PUT Index had higher returns and lower volatility than the other six benchmark indexes, and put option writing (as represented by the PUT Index) had much higher returns than put option buying (as represented by the PPUT Index). A driving factor behind strong risk-adjusted returns for the PUT Index has been the volatility risk premium; options sellers often have been rewarded because implied volatility usually has been higher than realized volatility for S&P 500 options.

1 31 years PUT bar Ret SD Award Winning PUT Index Now Has 31 Year Price History with Strong Risk Adjusted Returns at vixtrade.com

2 PUT Line 31 Years Award Winning PUT Index Now Has 31 Year Price History with Strong Risk Adjusted Returns at vixtrade.com

HISTOGRAM AND LESS LEFT-TAIL RISK

In the 31-year histogram, the left tail risk was mitigated in that the S&P 500 Index had 26 monthly declines with losses of worse than 6%, while the PUT Index had only 12 such declines.

3 PUT Histogram thru June 2017 Award Winning PUT Index Now Has 31 Year Price History with Strong Risk Adjusted Returns at vixtrade.com

NEWS COVERAGE OF PENSION FUNDS AND PUT-WRITE STRATEGY

Below are excerpts from three news stories on pension fund allocations to the put-write strategy.

  

  • Wall Street Journal   (Aug. 21, 2016)
    • Pensions Try a Fear Trade.  Options strategy used by pension funds aims to work like a volatility dampener Some pension funds are seeking to profit from others’ fear.   Pension funds in Hawaii and South Carolina are plying an arcane options strategy called cash-secured put writing. …  Hawaii wanted to diversify market exposure after the financial crisis hit many assets at once… Pension Consulting Alliance first suggested Hawaii use the strategy and currently advises on it, .. The CBOE S&P 500 PutWrite Index, a benchmark for the strategy, … didn’t fall as sharply as the market during the selloff of early 2016, but has lagged behind the rallies. In 2008, during the financial crisis, the put-write strategy returned minus-27% compared with the S&P 500’s return of minus-37%.  CBOE’s calculations of how the index would have performed before its 2007 creation estimate that annualized returns over the 30 years through this June were 10%, narrowly topping the S&P 500. …  ”

 

  • Pensions & Investments   (Oct. 3, 2016)
    • Funds go exotic with put-write options to stem volatility … Hawaii Employees in the spring hired Neuberger Berman, Analytic Investors, UBS Asset Management and Gateway Investment Advisers to run $400 million each in put-write strategies. This was the first move into the strategy for the pension fund. Earlier this year, the $28.2 billion South Carolina Retirement System Investment Commission, Columbia, hired Russell Implementation Services and AQR Capital Management to each manage $800 million in put-write strategies.  And the $16.6 billion Illinois State Universities Retirement System, Champaign, hired Gladius Capital Management to manage $400 million in notional value in a put-write overlay, a move that Executive Director W. Brian Lewis said would result in ‘an income enhancement tool’ … In its paper, Wilshire noted that the CBOE S&P 500 put-write index, with an annualized 10.1% return, outperformed the CBOE S&P 500 buy-write index’s 8.9% and the S&P 500 stock index’s 9.9% over 30 years ended Dec. 31. And for 2015 alone, the put-write index returned 6.4% vs. the buy-write index’s 5.2% and the S&P 500’s 1.4%. …” 

 RESEARCH PAPERS THAT HIGHLIGHT THE PUT INDEX

Visit www.cboe.com/benchmarks for links to the papers below that analyze the performance of the PUT and other benchmark indexes —

GROWTH IN VOLUME FOR S&P 500 OPTIONS

Average daily volume for S&P 500 options at CBOE: (1) has risen in each of the last 5 years, and (2) has risen more than 1000% since 2001.

4 SPX adv thru June Award Winning PUT Index Now Has 31 Year Price History with Strong Risk Adjusted Returns at vixtrade.com

AWARD FOR PUT INDEX AND PUTW ETF

On June 26 the CBOE S&P 500 PutWrite Index (PUT) and the WisdomTree CBOE S&P 500 PutWrite Strategy Fund ETF (PUTW) won the 2017 Index/ETF Product of the Year award at an annual ceremony that was presented by IMN and the Journal of Index Investing. The awards ceremony was held during the 22nd Annual Global Indexing and ETFs conference, a 3-day event with about 750 financial professionals (including representatives of CBOE, Bats, S&P Dow Jones Indices, and ETF.com) in attendance.

Award PUT PUTW Award Winning PUT Index Now Has 31 Year Price History with Strong Risk Adjusted Returns at vixtrade.com

Representatives of both CBOE and S&P Dow Jones Indices celebrated the award for the 2017 Index/ETF Product of the Year.

Pic 2017 06 26 CBOE SP reps at IMN PUT award Award Winning PUT Index Now Has 31 Year Price History with Strong Risk Adjusted Returns at vixtrade.com

MORE INFORMATION

The microsite for the PUT Index is at www.cboe.com/PUT.

For more information on dozens of CBOE benchmark indexes, please visit www.cboe.com/benchmarks for research papers and price charts,

If you would like to hear expert speakers discuss options and volatility, please visit www.cboermc.com to learn more about these upcoming CBOE Risk Management Conferences —

  • RMC EUROPE 2017, Sept. 11 – 13, 2017, The Grove Hotel, Chandler’s Cross, Hertfordshire, UK

 

  • RMC ASIA 2017, Dec 5 – 6, 2017, Conrad Hong Kong, Hong Kong

 

  • RMC US 2017, March 7 – 9, 2018, Hyatt Regency Coconut Point, FL

 Award Winning PUT Index Now Has 31 Year Price History with Strong Risk Adjusted Returns at vixtrade.com >

20 Volatility Indexes in 2016: BPVIX Rose 277% Pre-Brexit, and On Election Night VIX Futures Rose 55%

Dozens of worldwide volatility indexes can serve as valuable tools for investors who wish to gauge intraday and long-term sentiment changes related to a variety of asset classes. In addition, investors take long and short positions in futures and options on key volatility indexes.

The tables and seven graphs below provide an overview of the 2016 performance of 20 volatility indexes and the CBOE SKEW Index. Key points regarding volatility indexes in 2016 include the following:

  • There were some big moves in volatility indexes around the June 24 Brexit vote and the November 8 U.S. election.
  • New all-time daily trading volume records for futures on the CBOE Volatility Index® (VIX®) during Extended Trading Hours (non-U.S. hours from 3:30 p.m. to 8:30 a.m.) were set on June 24 (235,141 contracts) and again on November 9 (263,663 contracts).
  • The prices for VIX futures rose 55% over a 140-minute period on the night of November 8 (see Exhibit 2 below).
  • The daily closing values of the CBOE/CME FX British Pound Volatility Index (BPVIX) rose from 7.72 on Jan. 8th, to 29.10 on June 14th, a rise of 277% (see Exhibit 3 below). Implied volatility on the British pound was one of the financial markets’ biggest major movers in the months leading up to the Brexit vote (see Exhibit 3 below).
  • While the average daily closing value of the VIX Index in 2016 was 15.8 (below its long-term average of 19.7 since 1990), the average daily closing value of the CBOE SKEW Index was 127.6 (the second highest level among all its 27 years since 1990). These numbers could indicate that demand for hedging with deeper out-of-the-money S&P 500® (SPX) protective puts options could have been stronger in 2016.

VIX INDEX AND THE EXPECTED VOLATILITY OF THE S&P 500 INDEX

The CBOE Volatility Index® (VIX® Index) is a leading measure of market expectations of near-term volatility conveyed by S&P 500 Index (SPX) option prices.

In 2016 the daily closing values of the VIX ranged from 11.27 to 28.14, and the VIX rose a record ninth straight trading day on November 4 (prior to the U.S. election).

VVw1 VIX SPX 20 Volatility Indexes in 2016: BPVIX Rose 277% Pre Brexit, and On Election Night VIX Futures Rose 55% at vixtrade.com

VIX FUTURES ON NOVEMBER 8 AND 9

On the November 8 Tuesday election night in the United States, the reported prices for the November futures on the VIX Index rose from a low of 15.10 at 8:07 p.m. E.T., to a high of 23.46 at 10:27 p.m. E.T., a rise of 55% over a 140-minute period (source: Bloomberg). Reported volume for VIX futures during non-U.S. trading hours was an all-time record of 263,663 contracts during the November 9 trading session (which technically began at 3:30 p.m. C.T. the day before. www.cboe.com/ETH).  On Wednesday morning, the price of the VIX Nov. futures fell below 16, as a story at cbsnews.com noted that “Conciliatory comments from U.S. President-elect Donald Trump in the aftermath of his stunning victory over Hillary Clinton helped global stock markets erase a large chunk of their earlier losses Wednesday.”

 V 2 VIX Futures on Nov 8 9 20 Volatility Indexes in 2016: BPVIX Rose 277% Pre Brexit, and On Election Night VIX Futures Rose 55% at vixtrade.com

CURRENCY AND INTEREST RATE VOLATILITY

While average daily close for the BPVIX Index was 12.0 in 2016, the BPVIX Index soared to 29.1 on June 14, prior to the Brexit vote.  Futures on the CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (TYVIX) are available, and some observers believe that interest rate volatility could soar in 2017.

V 3 Curr Int Rate Vola in 2016 20 Volatility Indexes in 2016: BPVIX Rose 277% Pre Brexit, and On Election Night VIX Futures Rose 55% at vixtrade.com

COMMODITY VOLATILITY INDEXES IN 2016

In 2016 the CBOE Crude Oil ETF Volatility Index (OVX) hit a daily closing value peak of 78.97 on February 12, and it closed the year at 30.83.

V 4 Commodity Volatility 20 Volatility Indexes in 2016: BPVIX Rose 277% Pre Brexit, and On Election Night VIX Futures Rose 55% at vixtrade.com

WORLDWIDE VOLATILITY INDEXES IN 2016

In 2016 the peak daily closing values were 37.99 for the HIS Volatility Index (Hong Kong) and 39.90 for the EuroSTOXX 50 Volatility Index.

VVw5 Global Vola 20 Volatility Indexes in 2016: BPVIX Rose 277% Pre Brexit, and On Election Night VIX Futures Rose 55% at vixtrade.com

VOLATILITY ON SINGLE STOCKS

In 2016 the average daily closing values were 30.9 for the VXAZN Index, 23.6 for the VXGOG Index, and 25.3 for the VXAPL Index. Exhibit 6 shows that the VXAZN Index had some big moves, and that the earnings announcement dates for Amazon in 2016 were on January 28, April 28, July 28, and October 27.

V 6 Vol Stocks 20 Volatility Indexes in 2016: BPVIX Rose 277% Pre Brexit, and On Election Night VIX Futures Rose 55% at vixtrade.com

SKEW, VVIX AND VIX INDEXES

In 2016 the highest daily closing values were 153.66 for the CBOE SKEW Index on June 28, and 125.13 for the CBOE VIX of VIX Index (VVIX) on June 24. Both indexes hit relatively high levels around the June 24 Brexit vote and the November 8 U.S. election, as there was uncertainty as to how these events might impact equity markets.

V 7 SKEW VVIX 2016 20 Volatility Indexes in 2016: BPVIX Rose 277% Pre Brexit, and On Election Night VIX Futures Rose 55% at vixtrade.com

BENCHMARK INDEXES

The volatility indexes above are designed to primarily serve as gauges for market expectations of future volatility, and are not meant to show investable performance.

For those investors who would like to explore the possibility of investing in VIX futures and options, there are certain benchmark indexes that are designed to show the potential for investable performance for certain strategies that use VIX futures or VIX options. Here are the 2016 changes for a sampling of the many benchmarks that use VIX futures or VIX options –

  • 28.8%               S&P 500 VIX Futures Term-Structure Index TR
  • 25.2%               VPD – CBOE VIX Premium Strategy Index
  • 23.0%               VPN – CBOE Capped VIX Premium Strategy Index
  • 8.3%                 S&P 500 Dynamic VIX Futures Index TR
  • 1.1%                 VSTG – CBOE VIX Strangle Index
  • 1.0%                 VXTH – CBOE VIX Tail Hedge Index
  • 0.1%                 S&P 500 Dynamic VEQTOR Index TR
  • -28.3%              S&P 500 VIX Futures Tail Risk Index TR – Short Term

To learn more about the CBOE benchmark indexes, please visit www.cboe.com./benchmarks, and read closely the related disclosures and disclaimers. Past performance is not predictive of future returns.

MORE INFORMATION ON VOLATILITY INDEXES

Please visit www.cboe.com/volatility for links to information on more than 25 volatility indexes, strategies and a bibliography.

 20 Volatility Indexes in 2016: BPVIX Rose 277% Pre Brexit, and On Election Night VIX Futures Rose 55% at vixtrade.com >

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. …”

 FIVE CHARTS SHOW PRICE MOVES ON FRIDAY AFTERNOON

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.

 A VVIX Oct 28 VVIX Index Spikes 21% on News of Investigation – By Matt Moran at vixtrade.com

 

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.

B VIX on Oct. 28 VVIX Index Spikes 21% on News of Investigation – By Matt Moran at vixtrade.com

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.

C VIX Nov Futures VVIX Index Spikes 21% on News of Investigation – By Matt Moran at vixtrade.com

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.

D SPX on Oct 28 VVIX Index Spikes 21% on News of Investigation – By Matt Moran at vixtrade.com

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. …”

E Peso VVIX Index Spikes 21% on News of Investigation – By Matt Moran at vixtrade.com

MORE INFORMATION

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.

 VVIX Index Spikes 21% on News of Investigation – By Matt Moran at vixtrade.com >

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 –

AROUND-THE-CLOCK TRADING OF VIX FUTURES

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.

1 VIX Fut ETH volume Will VIX Futures Prices Move During the Sunday Night Debate? – By Matt Moran at vixtrade.com

EXPIRATION DATES FOR VIX FUTURES

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.

2 VIX fut expirations table Will VIX Futures Prices Move During the Sunday Night Debate? – By Matt Moran at vixtrade.com

MARKET MOVEMENTS DURING THE FIRST DEBATE ON THE NIGHT OF SEPTEMBER 26

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).

3 VIX Fut on Sep 26 Will VIX Futures Prices Move During the Sunday Night Debate? – By Matt Moran at vixtrade.com

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. …”

 CONCLUSION

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.

 Will VIX Futures Prices Move During the Sunday Night Debate? – By Matt Moran at vixtrade.com >

BPVIX Hits Highest Level in 7 Years, So Let’s See the Skew and Term Structure for Listed Options

On Monday the CBOE/CME FX British Pound Volatility Index (BPVIX) closed at 22.59, its highest daily close since March 2009, and the BPVIX Index has risen 161.8% so far this year (through June 6). A number of news articles have noted that the implied volatility for British Pound has risen during the past month because of concern about the upcoming June 23 Brexit referendum.

1 Vola indexes Three  BPVIX Hits Highest Level in 7 Years, So Let’s See the Skew and Term Structure for Listed Options at vixtrade.com

Recent headlines for news stories included (1) “Pound Falls, Volatility Jumps as Polls Show Momentum for Brexit” (Bloomberg on June 5), and (2) “Sterling volatility heads higher as Leave camp builds lead” (Financial Times on June 6). In addition, Timothy Edwards posted a VIX Views blog on “Divining Brexit.”

The BPVIX Index is not tradable and there are no BPVIX listed futures or options. As the vote on Brexit approaches, traders and investors could keep an eye on the volatility skew and term structure for key listed options.

VOLATILITY SKEW FOR KEY OPTIONS

Listed options are available on the CurrencyShares British Pound Sterling Trust (FXB). The FXB delivers exposure to changes in value of the British pound relative to the US dollar. At the end of last month the open interest for the FXB ETF options was 30,874 for the FXB put options, and 8,649 for FXB call options. The next chart below shows the volatility skew for the FXB options at the close on June 6 (when the FXB closed at 141.43). Note that the implied volatility for the out-of-the-money (OTM) FXB put options generally is much higher than the implied volatility for the OTM FXB call options, indicating high investor fear about possible future downside moves of the FXB.

2 FXB Skew BPVIX Hits Highest Level in 7 Years, So Let’s See the Skew and Term Structure for Listed Options at vixtrade.com

The two charts below show Bloomberg estimates of 30-trading-day impled volatility for five option classes. Note that for all the options classes (except VIX) in the charts below, the implied volatility at 90% moneyness is higher than the at-the-money (ATM) implied volatility, while the implied volatility for VIX at 110% moneyness is higher than the VIX ATM implied volatility.

4 Skew US BPVIX Hits Highest Level in 7 Years, So Let’s See the Skew and Term Structure for Listed Options at vixtrade.com

A valuable tool to see long-term trends in SPX skew and investors’ concerns about catastrophic risk is the CBOE SKEW Index at www.cboe.com/SKEW.

WEEKLY INDEX OPTIONS AND TERM STRUCTURE

CBOE offers SPX Weeklys that expire on Wednesdays and Fridays, and VIX Weeklys that expire on Wednesdays. Weeklys options can provide opportunities for investors to implement more targeted buying, selling or spreading strategies. Weeklys options can help investors efficiently take advantage of market events, such as earnings, government reports, voter elections and referenda, and Fed announcements.

A May 29 Business Insider post noted that Goldman Sachs options analysts issued a report that considers the messages volatility term structure is sending. The Business Insider post stated that —

Looking at the S&P 500 implied volatility term structure, a downward hook, or “kink” as the Goldman report says, is noticed just before the June 14-15 Fed meeting. Looking at term structure, markets are pricing in volatility around the June 23rd Brexit vote, but not necessarily the June 14-15 Fed meeting nor the U.S. Presidential election. “Elevated event risk creates “kinks” in term structures,” Gregory and Timcenko wrote. “The term structure of implied volatility is typically smooth and upward sloping. Excess hedging demand around specific expirations creates kinks in the term structure and provides clues as to how event risk is being priced.”

Below are CBOE-created term structure charts with Bloomberg estimates for select dates for OTM SPX puts and VIX calls at certain strike prices. With the Brexit vote scheduled for Thursday, June 23, it will be interesting to see how implied volatility moves around that date for the key index options. You can see the term structure for many more SPX standard expiration dates at www.cboe.com/VIXTerm.

5 Term structure BPVIX Hits Highest Level in 7 Years, So Let’s See the Skew and Term Structure for Listed Options at vixtrade.com

 BPVIX Hits Highest Level in 7 Years, So Let’s See the Skew and Term Structure for Listed Options at vixtrade.com >