Options on Ten Select Sector Indices To Launch

On September 12 CBOE Holdings, Inc. announced plans to expand its suite of product offerings tied to S&P Dow Jones Indices with the planned launch of options on the 10 S&P Select Sector Indices that comprise the S&P 500 Index, a key benchmark of the U.S. equities market.

  • Options will be available on 10 sectors that comprise the S&P 500, pending regulatory approval.
  • The new options are expected to hold particular market appeal for European investors interested in targeted exposure within key U.S. equity benchmarks.
  • Further expands CBOE’s successful suite of products tied to S&P Dow Jones Indices, with trading and settlement features similar to CBOE’s S&P 500 options (SPX).

CHART 1 – WEIGHTINGS FOR S&P SELECT SECTOR INDEXES

S1 Sectors weights pie chart Options on Ten Select Sector Indices To Launch at vixtrade.com 

CBOE Holdings President and Chief Operating Officer Chris Concannon delivered remarks on sectors to attendees of the 6th annual CBOE Risk Management Conference (RMC) Europe, currently taking place near London. “We are excited that we will be able to provide exposure to these key U.S. sector indices for European customers who have been keen to incorporate U.S. sector investing strategies into their portfolios, but have not had access to an efficient trading vehicle to realize this strategy,” Mr. Concannon said.

CHART 2 – TICKERS, NOTIONAL VALUE, HISTORIC VOLATILITY

The table provides index ticker symbol, options trading symbol, approximate notional value covered by index options with a $100 multiplier on September 1, 2017 (if they were available on that date), and the average 30-trading day historic volatility over 5 years for each of the 10 indexes. In addition, Chart 5 below shows how historic volatility had changed since 1998 for the Tech and Energy sectors.

S2 Tickers Notional Hist Vola Options on Ten Select Sector Indices To Launch at vixtrade.com

CHART 3 – PRICES SINCE MID-1998 FOR FIVE SELECT SECTOR INDEXES

 Nine of the ten S&P Select Sector indices have a price of 250 on June 30, 1998, while the S&P Real Estate Select Sector Index (IXRE, SIXRE) has a shorter price history and has a price of 100 on December 30, 2011. To facilitate easier comparison of the nine indexes with price history back to 1998, I created Chart 3 and Chart 4 below. In Chart 3, the (Consumer Discretionary) IXY Index rose 261% while the (Financial) IXM Index rose only 21%.

 S3 Sectors Five Lines 1 Options on Ten Select Sector Indices To Launch at vixtrade.com

 CHART 4 – PRICES SINCE MID-1998 FOR FIVE SELECT SECTOR INDEXES

In Chart 4 the IXV (Health Care) Index rose 226%, while the IXU (Utilities) Index rose 121%.

S4 Sectors Four Lines Options on Ten Select Sector Indices To Launch at vixtrade.com

CHART 5 – HISTORIC VOLATILITY FOR ENERGY AND TECH SECTORS SINCE 1998

The table in Chart 2 above presents the historic volatilities for all ten S&P Select Sector indices.

Chart 5 below shows the historic volatility since 1998 for the IXE (Energy) and IXT (Technology) indices. The volatility for IXT generally was higher in 2000 to 2002, while the volatility for IXE often was higher in recent years.

S5 Hist vola 2 indexes Options on Ten Select Sector Indices To Launch at vixtrade.com

CHART 6 – CORRELATIONS AMONG 12 INDICES OVER FIVE YEARS

Chart 6 below shows that the S&P Consumer Discretionary Select Sector Index (IXY, SIXY) and the S&P Industrials Select Sector Index (IXI, SIXI) both had high correlations of 0.90 versus the S&P 500 Index, while lower correlations versus the S&P 500 Index were shown for both the S&P Real Estate Select Sector Index (IXRE, SIXRE) (0.46) and for the S&P Utilities Select Sector Index (IXU, SIXU) (0.21).

S6 Sectors Correlations Table Options on Ten Select Sector Indices To Launch at vixtrade.com

EUROPEAN INVESTORS AND UCITS

CBOE Select Sector Index options are designed to potentially be problem-solvers for European asset managers who want exposure to these U.S. index sectors, but cannot hold physical delivery exchange-traded product (ETP) options in their funds because of EU regulations around UCITS (Undertakings for the Collective Investment of Transferable Securities). The options on the Select Sector Indexes are designed to provide simple, straightforward market access to these key U.S. equity sectors for European investors.

MORE INFORMATION

For more information on the planned options on S&P Select Sector Indices, including links to more than 100 price charts, and a Fact Sheet with key options specifications, please visit www.cboe.com/Sectors.

 

 

 

 Options on Ten Select Sector Indices To Launch 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 >