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 >

PUT Index and PUTW ETF Win Sharpe Indexing Award

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 reps of CBOE, S&P Global, Bats, and ETF.com) in attendance.

0 PUT PUTW award plaque PUT Index and PUTW ETF Win Sharpe Indexing Award at vixtrade.com

PERFORMANCE OF PUT INDEX OVER THREE DECADES

The PUT Index 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.

As shown in the three charts below, over more than three decades the PUT Index had higher returns and lower volatility than key benchmark indexes for stocks, Treasury bonds and commodities. In addition, papers by Bondarenko (2016)Black and Szado (2016) and Wilshire (2016) have statistics showing superior risk-adjusted returns and lower drawdowns for the PUT Index.

1 PUT Line 1986 to May 2017 PUT Index and PUTW ETF Win Sharpe Indexing Award at vixtrade.com

Note in the bar charts that put option writing (a represented by the PUT Index) had 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.

2 S Dev Ann Ret thru May 31 PUT Index and PUTW ETF Win Sharpe Indexing Award at vixtrade.com

VOLATILITY RISK PREMIUM – RICHLY PRICED INDEX OPTIONS

An inquiring investor might ask – how could the PUT Index have higher returns and lower volatility than traditional indexes over a period of three decades?

A key source of returns for sellers of SPX index options has been the fact that, according to Exhibit 5 in a 2016 paper by Professor Oleg Bondarenko, these options were richly priced in all the years from 1990 through 2015 (except in 2008).

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

 

 PUT Index and PUTW ETF Win Sharpe Indexing Award at vixtrade.com >

VIX and VVIX Indexes Both Jump More Than 45% on Wednesday, with Strong Trading Volumes

MAY 17, 2017 – Today both the CBOE Volatility Index (VIX) and the CBOE VIX of VIX Index (VVIX) rose more than 45%. Some U.S. news developments that impacted the financial markets today concerned the former FBI director James Comey and former National Security Adviser Michael Flynn.

TABLES WITH BIGGEST ONE-DAY MOVES

Today’s 46.4% move in the VIX Index was (in percentage terms) it sixth biggest move ever and its biggest one-day move (in percentage terms) since the Brexit vote.

1 VIX biggest  VIX and VVIX Indexes Both Jump More Than 45% on Wednesday, with Strong Trading Volumes at vixtrade.com

Nine days ago (on May 8) the VIX Index closed at 9.77, its lowest daily closing value since 1993.

Today the CBOE VIX of VIX Index (VVIX) rose 34.72 points (or 45.2%) – its second biggest up moves both in terms of points and percentages. The VVIX Index is an indicator of the expected volatility of the 30-day forward price of the VIX. This volatility drives nearby VIX option prices. The VVIX table below shows the days with the biggest up and down moves.

1 Largest VVIX VIX and VVIX Indexes Both Jump More Than 45% on Wednesday, with Strong Trading Volumes at vixtrade.com

Today more than six other volatility indexes (including VXST, VXGS, JYVIX, VXAZN, VXV, and VXAPL) rose more than 20%.

2 Volatility Indexes on May 17 VIX and VVIX Indexes Both Jump More Than 45% on Wednesday, with Strong Trading Volumes at vixtrade.com

3-MONTH PRICE CHARTS

The 3-month price charts from Livevol below show the big upward moves on May 17 for both the VIX and VVIX indexes.

3 VIX Livevol 3 mo May 17 1 VIX and VVIX Indexes Both Jump More Than 45% on Wednesday, with Strong Trading Volumes at vixtrade.com

4 VVIX Livevol 3 mo May 17 VIX and VVIX Indexes Both Jump More Than 45% on Wednesday, with Strong Trading Volumes at vixtrade.com

VIX FUTURES PRICES

The VIX Futures Prices table below shows that at 4:30 pm CT on May 17 (which actually was part of the May 18 trading day) the VIX futures prices ranged from 14.20 to 17.75.5 VIX Futures May 17 VIX and VVIX Indexes Both Jump More Than 45% on Wednesday, with Strong Trading Volumes at vixtrade.com

HIGH TRADING VOLUMES ON MAY 17

  • The trading volume at the all-electronic C2 Options Exchange, Incorporated (C2) set a one-day trading record with reported trading volume of 966,604 contracts, surpassing a previous single-day record of 825,299 contracts set on November 9, 2016.
  • Trading volume on Bats’ two options exchanges, BZX and EDGX, also each had their second-busiest single trading days ever, with BZX trading a reported 3.9 million contracts and EDGX trading a reported 317,250 contracts. Bats is a CBOE Holdings company.
  • Trading volume at Chicago Board Options Exchange, Incorporated (CBOE) was a reported 7.6 million contracts, and combined reported trading volume at CBOE Holdings’ four options exchanges totaled nearly 13 million contracts on Wednesday.
  • In addition, CBOE Futures Exchange, LLC (CFE) today set its third-highest trading volume day with a reported 735,161 contracts. The flagship product of the CFE is VIX futures.

MORE INFORMATION

Visit www.cboe.com/volatility for more information about how to use volatility indexes and VIX futures and options.

 VIX and VVIX Indexes Both Jump More Than 45% on Wednesday, with Strong Trading Volumes at vixtrade.com >

2017 Volume Rises for VIX and SPX Options, and for VIX Futures

Monday, May 8, 2017 – After the results of the French election were announced yesterday, this was a notable day in the options and volatility markets –

  • The CBOE Volatility Index® (VIX®) fell 0.80 points and closed at 9.77 (it lowest daily close since December 1993);
  • Bloomberg’s estimate of 30-trading day historic volatility for the S&P 500 Index fell to 6.52;
  • The CBOE SKEW Index (SKEW) fell 3.24 points to close at 128.12 (still well above its long-term-average of 118.6)

Today I received multiple questions from customers about press coverage of options volume trends. While many observers believe that low volatility often can inhibit options volume growth, some investors like the idea of purchasing relatively “cheap” options protection when the VIX Index is well below its long-term average.

TRENDS IN VOLUME AND OPEN INTEREST FOR KEY INDEX OPTIONS AND FUTURES

VIX futures average daily volume rose to 265, 954 in Jan.-April 2017, and it is up for the 11th year in a row.

1 VIX Futures ADV Thru April 2017 Volume Rises for VIX and SPX Options, and for VIX Futures at vixtrade.com

VIX options average daily volume rose to 712,490 in Jan.-April 2017.

2 VIX options a d v thru April 2017 Volume Rises for VIX and SPX Options, and for VIX Futures at vixtrade.com

In March 2017 the VIX options open interest rose to more than 12.8 million contracts.

3 VIX options total open interest 2017 Volume Rises for VIX and SPX Options, and for VIX Futures at vixtrade.com

In March 2017 the VIX call options open interest rose to more than 9 million contracts.

4 VIX options calls puts opne interest 2017 Volume Rises for VIX and SPX Options, and for VIX Futures at vixtrade.com

SPX options average daily volume rose to 1,161936 in Jan.-April 2017.

5 SPX a d v thru April 2017 2017 Volume Rises for VIX and SPX Options, and for VIX Futures at vixtrade.com

MORE INFORMATION

To learn more about use of SPX and VIX options, and VIX futures, please visit www.cboe.com/SPX and www.cboe.com/VIX.

 

 2017 Volume Rises for VIX and SPX Options, and for VIX Futures at vixtrade.com >

Portfolio Protection, Tail Risk and 11 Histograms

With U.S. stock market indexes recently hitting all-time highs, there is quite a bit investor uncertainty about the markets and there is high demand for protection from large market declines. One metric providing evidence of this high demand is the CBOE SKEW Index (SKEW). In the 27 years from 1990 through 2016, the average daily level for the SKEW Index was 118.4, and the average level of SKEW never topped 130 in any of those 27 years. In the year 2017 (through February 7) the average daily level of the SKEW Index was a relatively high 131.7, which could indicate increased relative demand for use of out-of-the-money SPX put options for portfolio protection.

Histograms and Profit-and-Loss Diagrams

Tools that can be helpful to investors who are attempting to assess the utility of various options-based strategies include (1) histograms with analyses of monthly returns for several CBOE benchmark indexes, and (2) profit-and-loss diagrams.  CBOE provides more than 30 strategy benchmark indexes that can help investors compare and contrast the hypothetical performance of different options strategies in different market scenarios. www.cboe.com/benchmarks.

Below are 11 histograms that compare past performance of CBOE option-related benchmark indexes and related stock indexes. These histograms can provide valuable information to investors who have high aversion to losses or a desire for more upside potential.

As shown in the 11 histograms below, the “best” big-loss-avoidance past performance by an index — in terms of avoiding monthly losses of 6% or more – was by the CBOE S&P 500 Iron Butterfly Index (BFLY). In the 30+ year period from July 1986 through January 2017, the number of months that indexes had loss of worse than 6% were –

The CBOE VIX Tail Hedge Index (VXTH) buys and holds S&P 500 stocks, and also often buys 30-delta call options on the CBOE Volatility Index® (VIX®).

1070 VXTH Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

 

1012 BFLY Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

The CBOE S&P 500 Iron Butterfly Index (BFLY) tracks the performance of a hypothetical option trading strategy that 1) sells a rolling monthly at-the-money (ATM) S&P 500 Index (SPX) put and call option; 2) buys a rolling monthly 5% out-of-the-money (OTM) SPX put and call option to reduce risk; and 3) holds a money market account invested in one-month Treasury bills, which is rebalanced on the option roll day and is designed to limit the downside return of the index. Compare the CBOE BFLY Index histogram above with the iron butterfly profit-and-loss diagram below. It appears that certain iron butterfly strategies could have the potential to lessen the probability of huge upside and downside moves.

1015 ironbutterfly PL Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

 

1020 CLL Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

The CBOE S&P 500 95-110 Collar Index (CLL) purchases stocks in the S&P 500 index, and each month sells SPX call options at 110% of the index value, and each quarter purchases SPX put options at 95% of the index value.

1025 Collar PL Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

 

1030 RXM Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

The CBOE S&P 500 Risk Reversal Index (RXM) is a benchmark index designed to track the performance of a hypothetical risk reversal strategy that: (1) buys a rolling out-of-the-money (delta ? 0.25) monthly SPX Call option; (2) sells a rolling out-of-the-money (delta ? – 0.25) monthly SPX Put option; and (3) holds a rolling money market account invested in one-month Treasury bills to cover the liability from the short SPX Put option position.

1040 CLLZ Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

The CBOE S&P 500 Zero-Cost Put Spread Collar Index (CLLZ) tracks the performance of a hypothetical option trading strategy that 1) holds a long position indexed to the S&P 500 Index; 2) on a monthly basis buys a 2.5% – 5% S&P 500 Index (SPX) put option spread; and 3) sells a monthly out-of-the-money (OTM) SPX call option to cover the cost of the put spread.

1060 CNDR Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

The CBOE S&P 500 Iron Condor Index (CNDR) tracks the performance of a hypothetical option trading strategy that 1) sells a rolling monthly out-of-the-money (OTM) S&P 500 Index (SPX) put option (delta ? – 0.2) and a rolling monthly out-of-the-money (OTM) SPX call option (delta ? 0.2); 2) buys a rolling monthly OTM SPX put option (delta ? – 0.05) and a rolling monthly OTM SPX call option (delta ? 0.05) to reduce risk; and 3) holds a money market account invested in one-month Treasury bills, which is rebalanced on option roll days and is designed to limit the downside return of the index.

1065 ironcondor PL Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

 

1100 PPUT Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

1080 PUT Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

 

1095 cs PutWrite PL Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

1110 CMBO Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

1115 cov Combo PL Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

 

1120 BXM Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

1135 ATM Buywrite PL Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

With the at-the-money (A-T-M) buy-write strategy, an investor often takes in more options premium, but has no participation in stocks’ upside moves, when compared with the out-of-the-money (O-T-M) buywrite strategy. Compare right and left tails for the BXM Index above versus the BXMD Index below.

1140 BXMD Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

1155 OTM BuyWrite Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com

MORE INFORMATION

A representatives of Wilshire will discuss CBOE Benchmark indexes and downside risk at the 33rd Annual CBOE Risk Management Conference (RMC) next month www.cboermc.com.

For additional information about the CBOE benchmark indexes and related white papers on portfolio management, please visit www.cboe.com/benchmarks.

More information on tail risk and histograms is at www.cboe.com/histograms.

 Portfolio Protection, Tail Risk and 11 Histograms at vixtrade.com >

Demand for Disaster Protection Increases as CBOE SKEW Index Hits a Six-Month High – By Matt Moran

JAN. 18, 2017 – Today the CBOE SKEW Index (SKEW) closed at 143.43, its highest value since June 2016. 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.

SKEW Jan 18 Demand for Disaster Protection Increases as CBOE SKEW Index Hits a Six Month High – By Matt Moran at vixtrade.com

The FAQ on the 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.”

HIGHER SKEW VALUES IN RECENT YEARS

The average value of SKEW (since the beginning of its data history in 1990) has been 118.4. Prior to 2014, the highest average daily closing value in a year for the SKEW Index was 122.5, but in each of the years 2014, 2015, 2016, and year-to-date 2017, the average daily closing level for the SKEW Index was 127.5 or higher.

 SKEW since 1990 through Jan 18 Demand for Disaster Protection Increases as CBOE SKEW Index Hits a Six Month High – By Matt Moran at vixtrade.com

30 ½ YEARS — BENCHMARK INDEXES AND SPX PUT OPTIONS

For investors who wish to learn more about hypothetical long-term performance of strategies that use index options, CBOE provides more than 30 strategy benchmark indexes. Note in the two charts below that the left tail risk was higher for the S&P 500 Index than it was for two indexes that use SPX put options – the CBOE S&P 500 PutWrite Index (PUT) sells cash-secured SPX options, while the CBOE S&P 500 5% Put Protection Index (PPUT) buys out-of-the-money protective put options on the SPX Index.

3 PUT Histogram Demand for Disaster Protection Increases as CBOE SKEW Index Hits a Six Month High – By Matt Moran at vixtrade.com

4 PPUT Histogram Demand for Disaster Protection Increases as CBOE SKEW Index Hits a Six Month High – By Matt Moran at vixtrade.com

MORE INFORMATION

For more information on skew and use of options for protection and income, please visit www.cboe.com/SKEW and www.cboe.com/benchmarks.

 Demand for Disaster Protection Increases as CBOE SKEW Index Hits a Six Month High – By Matt Moran 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 >

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.

 PRICE CHARTS SINCE OCTOBER 24

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.

1 VIX VVIX Nov 7 On Election Eve, Volatility Indexes for Stocks, Gold, Currencies & Volatility Fall By More than 8% (after Record 9 Day Up Streak) at vixtrade.com

2 VXEFA GVZ On Election Eve, Volatility Indexes for Stocks, Gold, Currencies & Volatility Fall By More than 8% (after Record 9 Day Up Streak) at vixtrade.com

VOLATILITY SKEW FOR VIX OPTIONS

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).

1 VIX vola skew on Nov7 On Election Eve, Volatility Indexes for Stocks, Gold, Currencies & Volatility Fall By More than 8% (after Record 9 Day Up Streak) at vixtrade.com

MORE INFORMATION

 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.

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

Sept. 22 Webinar – Case Studies on Institutional Investor Use of VIX

On Thursday, September 22 at 2:00 p.m. E.T., S&P Dow Jones Indices and CBOE will co-host a complimentary webinar for financial professionals on the topic of — How are Institutional Investors Using VIX®?  Financial professionals who wish to register and see more information are welcome to visit this link — http://bit.ly/VIX-Sep22.

A Sep 22 webinar speakers Sept. 22 Webinar – Case Studies on Institutional Investor Use of VIX at vixtrade.com

The panel will cover:

  •       An introduction to the VIX index, its related tradable products, and its historical performance relative to the S&P 500
  •      Using VIX Index products as the basis for pure-play volatility strategies to manage risk, extract yield, or diversify portfolios
  •      First-hand experiences and case studies from asset owners and managers who use VIX Index products in their portfolios as a means to mitigate risk while capturing returns

You are welcome to submit your questions during the live Q&A session following the webinar.

**********

In several recent news clips financial professionals have comments on the possibility that the VIX Index might rise in coming months with possible interest rate changes and the U.S. presidential election.

This chart shows recent prices for the VIX Index and for select VIX futures; note that while the price for the VIX Index was 14.07, the price for the VIX future with the November 16 expiration was 17.85. During the webinar the institutional investors will discuss the pricing for VIX futures and options, and how these products are used in portfolio management.

B VIX futures on Aug 31 2 Sept. 22 Webinar – Case Studies on Institutional Investor Use of VIX at vixtrade.com

Financial professionals who wish to register and see more information are welcome to visit this link — http://bit.ly/VIX-Sep22.

 

 

 Sept. 22 Webinar – Case Studies on Institutional Investor Use of VIX at vixtrade.com >

Records for VIX Futures and for SPXW Wednesday Expirations – by Matt Moran

Below are updates on (1) VIX futures, (2) SPXW Wednesday-Expiring Weekly options, and (3) the BPVIX Index.

(1.) RECORD OPEN INTEREST. Futures on the CBOE Volatility Index® (VIX®), which launched in 2004, experienced some milestones regarding open interest in recent days –

  • VIX futures open interest surpassed 500,000 for the first time on June 6;
  • VIX Futures open interest hit a new all-time record high of 501,835 on June 7. www.cboe.com/VIX.

1 VIX futuresrecord open interest Records for VIX Futures and for SPXW Wednesday Expirations – by Matt Moran at vixtrade.com

(2.)  RECORD VOLUME. On February 23, 2016, CBOE launched trading of weekly options on the S&P 500® Index which expire on Wednesdays. The average daily volume for SPXW Wednesday-Expiring Weekly options grew to a record 74,114 in May, and then to 105,768 so far this month (through June 14).  www.cboe.com/SPXW.

1 Wed Exp Weekly volume Records for VIX Futures and for SPXW Wednesday Expirations – by Matt Moran at vixtrade.com

CBOE’s February press release noted –

“We are pleased to further expand our SPX product complex with the introduction of SPX Weeklys with Wednesday expirations,” said CBOE Holdings CEO Edward T. Tilly. “Wednesday Weeklys, in addition to end-of-the-week expirations, will increase opportunities to trade SPX and enable investors to better target specific expirations. Wednesday Weeklys will align with VIX Weeklys futures and options, which also expire on Wednesdays, to provide greater trading flexibility for the increasing number of customers who use both our SPX and VIX product suites.”

(3.)  BPVIX RISES 322% IN 2016 (Y-T-D) ON BREXIT CONCERNS

The CBOE/CME FX British Pound Volatility Index (BPVIX) rose around 322% year-to-date (through June 16). Much of the rise in the index has been attributed to anxiety re the possible impact of the Brexit in/out referendum on June 23.

3 Volatility indexes BPVIX VIX Records for VIX Futures and for SPXW Wednesday Expirations – by Matt Moran at vixtrade.com

For more information on volatility indexes, and on VIX futures and options, please visit www.cboe.com/volatility.

 Records for VIX Futures and for SPXW Wednesday Expirations – by Matt Moran at vixtrade.com >