All-time Record Volume for VIX Options Today, as VIX Index Hits Its Highest Level Since August

FRIDAY, DEC. 1, 2017 – Today’s trading volume for options on the Cboe Volatility Index® (VIX®) was a reported 3.1 million contracts, the highest number for single-day volume in the VIX options since they commenced trading in 2006.

1 Top 10 VIX op volume days All time Record Volume for VIX Options Today, as VIX Index Hits Its Highest Level Since August at vixtrade.com

HIGHEST VALUE SINCE AUGUST

Today the VIX Index hit an intraday high of 14.58, its highest value since August. Key news events today concerned the tax legislation in the U.S. Congress, and the plea by Michael Flynn.

2 VIX Hi Low Close All time Record Volume for VIX Options Today, as VIX Index Hits Its Highest Level Since August at vixtrade.com

VIX OPTIONS AND FUTURES VOLUME IS UP IN 2017

Average daily volume for both VIX options and VIX futures has increased in 2017, as investors use these powerful tools in a variety of ways for portfolio management.

2 VIX options adv 2017  All time Record Volume for VIX Options Today, as VIX Index Hits Its Highest Level Since August at vixtrade.com

3 VIX futures adv thru 2017 11 All time Record Volume for VIX Options Today, as VIX Index Hits Its Highest Level Since August at vixtrade.com

MORE INFORMATION

To learn more about use of VIX options and VIX futures, please visit Cboe’s VIX webpages at www.cboe.com/VIX.

 All time Record Volume for VIX Options Today, as VIX Index Hits Its Highest Level Since August at vixtrade.com >

Tech Sector Index is Top Performer in 2017, as Options on Ten Select Sector Indexes Are Planned

One of the most frequent types of questions I receive from investors involves the topic of year-to-date performance.  Many investors are very interested in tracking how indexes have performed in the current year.

As shown in the two charts below, of the ten S&P Select Sector indexes, the top and bottom performers in terms of price index returns in 2017 (through November 7) were the S&P Technology Select Sector Index (IXT), which was up 32%, and the S&P Energy Select Sector Index (IXE), which was down 6%.

1 3 indexes 2017 Tech Sector Index is Top Performer in 2017, as Options on Ten Select Sector Indexes Are Planned at vixtrade.com

2 11 indexes in 2017 Tech Sector Index is Top Performer in 2017, as Options on Ten Select Sector Indexes Are Planned at vixtrade.com

HISTORIC VOLATILITY IN 2017

So far in 2017, the averages of the daily 20-trading day historic volatilities (through September 7) were:

  • 13.4 for the S&P Technology Select Sector Index (IXT);
  • 9.8 for the S&P Energy Select Sector Index (IXE);
  • 6.8 for the S&P 500 Index (SPX); and
  • 3.2 for the Cboe S&P 500 PutWrite Index (PUT), an index that sells cash-secured SPX put options.

2 5 Hist vola in 2017 Tech Sector Index is Top Performer in 2017, as Options on Ten Select Sector Indexes Are Planned at vixtrade.com PLANS FOR OPTIONS ON SELECT SECTOR INDICES

 Cboe Global Markets has announced plans to expand its suite of product offerings tied to S&P Dow Jones Indices with the planned launch of options on the ten 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).

 WEIGHTINGS FOR S&P SELECT SECTOR INDICES

The S&P Technology Select Sector Index (IXT) has the largest weighting of all the ten S&P Select Sector indexes.

3 sector weights Tech Sector Index is Top Performer in 2017, as Options on Ten Select Sector Indexes Are Planned at vixtrade.com

EUROPEAN INVESTORs, UCITS, AND CASH-SETTLED INDEX OPTIONS

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.

 Tech Sector Index is Top Performer in 2017, as Options on Ten Select Sector Indexes Are Planned at vixtrade.com >

VIX Index Hits All-Time Daily Closing Low Value of 9.14

On November 3 the Cboe Volatility Index® (VIX®) closed at 9.14, an all-time record low for both a daily and weekly closing value for the index.

1 VIX highest lowest 1 VIX Index Hits All Time Daily Closing Low Value of 9.14 at vixtrade.com

While the news media often focuses on the spot VIX Index, volatility traders analyze the price movements of VIX futures. The prices for VIX futures at the close on November 3 ranged from 10.1 to 16.4.

2 VIX futures Nov 3 VIX Index Hits All Time Daily Closing Low Value of 9.14 at vixtrade.com

3 VIX Nov 3 VIX Index Hits All Time Daily Closing Low Value of 9.14 at vixtrade.com

In light of the fact that the VIX Index recently has been well below its long-term average of 19.4, some observers might question whether there might be too much complacency in the markets. However, it is worth noting that the Cboe SKEW Index usually has been well-above its long-term average of 118.6 in recent months. www.cboe.com/skew.

4 SKEW Nov 3 VIX Index Hits All Time Daily Closing Low Value of 9.14 at vixtrade.com

Investors can learn more about use of VIX futures and options at www.cboe.com/VIX and at upcoming Cboe Risk Management Conferences

  • Cboe RMC Asia. Dec. 5 – 6, 2017   at Conrad Hong Kong  www.cboermcasia.com;
  • Cboe RMC US. March 7 – 9, 2018   at Hyatt Regency Coconut Point, FL  cboermcus.com;
  • Cboe RMC Europe. Sept. 12 – 14, 2018 at Powerscourt Hotel in Enniskerry, Ireland www.cboermceurope.com.

 

 VIX Index Hits All Time Daily Closing Low Value of 9.14 at vixtrade.com >

Weekend Review of VIX Futures and Options – 10/29/2017

VIX finished the week lower, but notice the change for the standard first, second, and third month futures which was green for the week.  VIX may have dropped at the end of the week, but the VIX futures are acting like the volatility players are not expecting the move lower to hold.

 Weekend Review of VIX Futures and Options – 10/29/2017 at vixtrade.com

One trader took advantage of the volatility strength on Wednesday to get short volatility using Weeklys futures.  With VIX around 12.90 and the Nov 8th Future at 13.00 there was a small buyer of the VIX Nov 8th 13 Puts at 1.50.  They goal here is for VIX to move lower and November 8th settlement to be in line with what has been common lately, a 10 or even 9 handle.  The break-even on this trade at expiration is 11.50 so if things go back to 2017 normal this may be a smart, well-timed fade of VIX moving up this week.

 Weekend Review of VIX Futures and Options – 10/29/2017 at vixtrade.com

 Weekend Review of VIX Futures and Options – 10/29/2017 at vixtrade.com >

Weekend Review of Volatility Indexes and ETPs – 10/29/2017

Of the four volatility indexes based on SPX option pricing, only VIX was lower last week.  This is the second week where the longer dated indexes (VIX3M and VXMT) rose while VIX was lower.

 Weekend Review of Volatility Indexes and ETPs – 10/29/2017 at vixtrade.com

Despite VIX dropping the long ETPs gained ground last week.  This is a great lesson in what these products give you, exposure to VIX futures and both the November and December contracts rose slightly despite the drop in VIX.

 Weekend Review of Volatility Indexes and ETPs – 10/29/2017 at vixtrade.com

Of note on the table below is the majority of green lines versus reddish lines.  It’s been rare in 2017 that more volatility indexes rise than drop on a week over week basis.

 Weekend Review of Volatility Indexes and ETPs – 10/29/2017 at vixtrade.com

On Wednesday VXX spent some time above 38 and when the popular ETN was around 38.50 someone came in and decided the move wouldn’t run to the low 40’s through the end of the week.  Specifically there was a seller of the VXX Oct 27th 42 Calls for 0.51 who purchased the VXX Oct 27th 45 Calls for 0.26 and a credit of 0.25.  The risk here is VXX over 45.00 and a loss of 2.75.  However, there wasn’t much danger of this happening as VXX turned to the downside shortly after this trade.

 Weekend Review of Volatility Indexes and ETPs – 10/29/2017 at vixtrade.com

 Weekend Review of Volatility Indexes and ETPs – 10/29/2017 at vixtrade.com >

Weekend Review of VIX Futures and Options – 10/22/2017

VIX was higher last week, despite the S&P 500 hitting a record high for five days in a row.  At low levels this sort of divergence between VIX and the S&P 500 isn’t usually much of a big deal.  But I wonder if there may be more significance since VIX under 10 has become a bit more of a norm.

 Weekend Review of VIX Futures and Options – 10/22/2017 at vixtrade.com

I love going through time and sale to see what sort of trading has been going on in VIX options and it’s a bonus when I find a trade structure that’s uncommon.  This leads me to this week’s trade which combined a synthetic long VIX position with a long VIX put.  On Thursday, there was a buyer of the VIX Oct 25th 12 Calls at 0.36 who sold the VIX Oct 25th 12 Puts at 1.52 which is a synthetic long position in VIX with a price of 10.84.  Since it’s VIX we can think of it as a synthetic long Oct 25th VIX Futures position (it appears the Oct 25th VIX futures were trading at 10.85 at the time).  To round out the trade they purchased the VIX Oct 25th 11.50 Puts for 1.09.  The results a payoff that looks like the diagram on expiration date.

 Weekend Review of VIX Futures and Options – 10/22/2017 at vixtrade.com

If the chart above looks familiar it is because it is a long call.   With three legs a trader basically replicated a long 11.50 Call at a cost of 0.43.   The market for those options was 0.45 x 0.50 at the time of the trade so they did a little bit better by executing the spread as opposed to buying the call options.

 Weekend Review of VIX Futures and Options – 10/22/2017 at vixtrade.com >

Weekend Review of Volatility Indexes and ETPs – 10/22/2017

The short term volatility indexes (VXST and VIX) were up a bit last week as the S&P 500 set multiple all-time closing record highs last week.  VIX3M (formerly VXV) and VXMT were both up slightly resulting the rare ‘term-structure twist’.  It’s really not that rare, I just had a nature documentary voice in my head as I typed that.

 Weekend Review of Volatility Indexes and ETPs – 10/22/2017 at vixtrade.com

The table below has few surprises (beyond VXST and VIX higher).  TYVIX heading to higher levels is a bit of a head scratcher until I notice the December FOMC meeting is sneaking up on us.  It’s difficult to think the December meeting is around the corner when it’s 75 degrees in Chicago as I type this.  Finally, worth noting is SKEW rallying to near all-time highs as the S&P 500 did the same.

 Weekend Review of Volatility Indexes and ETPs – 10/22/2017 at vixtrade.com

Across the volatility universe most indexes were lower.  IBM and Goldman Sachs volatility on the bottom of the table is a great reminder than not all volatility markets are the same.  Looking at the top end of the chart the words, ‘mixed bag’ popped into my mind.

 Weekend Review of Volatility Indexes and ETPs – 10/22/2017 at vixtrade.com

As mentioned already, we experienced a short-lived volatility spike Thursday morning, this sent me looking for traders using options on volatility linked ETPs to take the other side of this move.  With VXX up around 35.60 a trader came in and sold the VXX Oct 20th 34.00 Calls at 1.68 and purchased the VXX Oct 20th 36.50 Calls for 0.31 and a net credit of 1.37.  The payout at expiration (Friday’s close) shows up below.

 Weekend Review of Volatility Indexes and ETPs – 10/22/2017 at vixtrade.com

This turned out to be a well-timed fade of the volatility move that lasted about 45 minutes.  VXX finished the week at 33.79, 0.21 under the short call strike of 34.00 which places it a perfect place for this bear call spread as both options expired with no value.

 Weekend Review of Volatility Indexes and ETPs – 10/22/2017 at vixtrade.com >

Strong Growth for Key Cboe Index Products in 2017

An October 17 press release introduced a new name , “Cboe Global Markets, Inc. … identity and mission at the Futures Industry Association (FIA) Expo 2017 conference, currently taking place in Chicago.  The changes were made to better reflect the evolving nature and spirit of the company and follows the acquisition of Bats Global Markets (Bats) earlier this year.” www.cboe.com/aboutcboe.

0 Header Cboe IndexProducts2017 Header Strong Growth for Key Cboe Index Products in 2017 at vixtrade.com

Below is an update with ten charts that show growth in 2017 for some of the many index products offered by the marketplaces of Cboe Global Markets.

Below is an update with ten charts that show growth in 2017 for some of the many index products offered by the marketplaces of Cboe Global Markets.

  1. CAPACITY AND NOTIONAL VALUE OF SPX OPTIONS VOLUME

When I am discussing the Cboe’s BXM and PUT indexes with institutional investors, common questions I hear include – What about the capacity of the options markets? Can the options markets handle an influx of billions of dollars of new allocations by pension and endowment funds? In my answer to these questions, I usually present a chart on the notional value of average daily volume for the S&P 500® (SPX) options, which has more than doubled over the past five years.  The notional value of the SPX index options volume has been much higher than that of options on single stocks. www.cboe.com/SPX

01 Notional SPX Strong Growth for Key Cboe Index Products in 2017 at vixtrade.com

  1. VIX OPTIONS VOLUME

In 2017 (through September) the average daily volume for options on the Cboe Volatility Index® (VIX®) was 738,810, which was about 26% higher than the average daily volume for the full year of 2016. This volume growth occurred despite the fact that the average daily closing value for the VIX Index in 2017 year-to-date is around 11.3. www.cboe.com/VIX.

02 VIX Options Strong Growth for Key Cboe Index Products in 2017 at vixtrade.com

  1. VIX FUTURES VOLUME

The average daily volume for VIX futures on Cboe Futures Exchange has grown every year in the past decade. www.cboe.com/VIX.

03 VIX Futures adv Strong Growth for Key Cboe Index Products in 2017 at vixtrade.com

  1. SPXW WEEKLY OPTIONS AND TARGETED PORTFOLIO MANAGEMENT OPPORTUNITIES

Cboe Options Exchange now offers SPXW Weekly options with p.m.-expirations on Mondays, Wednesdays and Fridays. SPXW Weekly options can provide opportunities for investors to implement more targeted buying, selling or spreading strategies. Specifically, SPXW Weeklys may help investors efficiently take advantage of market events, such as earnings, government reports and Fed announcements. Average daily volume for SPXW Weekly options grew from 99,358 in 2012 to around 500,000 this year. www.cboe.com/SPXW.

04 SPX Weekly Strong Growth for Key Cboe Index Products in 2017 at vixtrade.com

  1. BENCHMARK INDEXES OVER THREE DECADES – BXMD, PUT AND BXM

Cboe Options Exchange offers dozens of benchmark indexes designed to show the hypothetical performance of strategies that use index options. As shown in the chart below, from mid-1986 through last month, the Cboe S&P 500 30-Delta BuyWrite Index (BXMD) rose 2313%, the Cboe S&P 500 PutWrite Index (PUT) rose 1910%, and the Cboe S&P 500 BuyWrite Index (BXM) rose 1350%. In addition, the BXMD, PUT, and BXM all had much less volatility than the S&P 500 and S&P GSCI indexes.

05 Benchmarks Strong Growth for Key Cboe Index Products in 2017 at vixtrade.com

White papers and more information on Cboe benchmark indexes are at www.cboe.com/benchmarks.

  1. BENCHMARK INDEXES IN 2017

So far in 2017, Cboe benchmark indexes that gained  more than 13% include the BXY, VXTH, VPD, VPN, LOVOL , and BXMC indexes. To learn more about these indexes, please visit www.cboe.com.benchmarks.

6 SPX Benchmarks in 2017 Strong Growth for Key Cboe Index Products in 2017 at vixtrade.com

7 VIX benchmarks in 2017 Strong Growth for Key Cboe Index Products in 2017 at vixtrade.com

  1. HIGHER SKEW INDEX IN 2017

In early 2017 the minutes of the U.S. Federal Reserve Board “expressed concern that the low lev7 el of implied volatility in equity markets appeared inconsistent with the considerable uncertainty …”, and several observers this year have noted that the VIX Index has been well below its long-term average in 2017. Is there too much complacency in the equity markets? One gauge, the Cboe SKEW Index, hit an all-time high of 154.34 on March 17, 2017, and the SKEW Index has been well above its long term average during most of 2017. A relatively high level of the SKEW Index indicates that there is investor fear of big future losses in the markets. www.cboe.com/SKEW.

8 SKEW Oct 13 Strong Growth for Key Cboe Index Products in 2017 at vixtrade.com

MORE INFORMATION

Expert presentations on Cboe index products will be delivered at upcoming multi-day Cboe Risk Management Conferences in Hong Kong, Florida and Ireland. www.cboermc.com.

To learn more about index products, please visit –

 

 Strong Growth for Key Cboe Index Products in 2017 at vixtrade.com >

Weekend Review of VIX Futures and Options – 10/15/2017

On a week over week basis VIX hardly budged, but we did have a couple of days with closes over 10.00 both Monday and Tuesday.  In fact, we would have had a double digit VIX highs each day if it weren’t for Friday’s price action falling short by 0.02.  The curve moved lower than VIX as October played catch up with VIX going into this week’s settlement.

 Weekend Review of VIX Futures and Options – 10/15/2017 at vixtrade.com

Worth noting is the volatility of VIX options.  Specifically, the level of VVIX, which ticked higher last week and has been at the higher end of the 2017 range lately as well as well over the long-term average with is about 88.00 using the history we have going back to 2007.  VIX may be low, but VIX option buyers are willing to pay up for options.

 Weekend Review of VIX Futures and Options – 10/15/2017 at vixtrade.com

Another great example of using VIX Weeklys, with VIX at 10.05 and the November 1st VIX future quoted about a point higher a trader bought 7500 VIX Nov 1st 14 Calls for 0.63 and then sold 7500 VIX Nov 1st18 Calls for 0.31 and a net cost of 0.32.

 Weekend Review of VIX Futures and Options – 10/15/2017 at vixtrade.com

 Weekend Review of VIX Futures and Options – 10/15/2017 at vixtrade.com >

Weekend Review of Volatility Indexes and ETPs – 10/15/2017

There are lots of articles floating around discussing the lack of volatility in the markets along with the low level of VIX.  It’s reaching a point where we don’t have much else to say and are just waiting for a change of scenery.  With all that going on, the four volatility indexes based on SPX option pricing remained low and on average were basically unchanged last week.

 Weekend Review of Volatility Indexes and ETPs – 10/15/2017 at vixtrade.com

There is a single data point standing out on the table below.  That is VVIX in the upper 90’s.  Despite VIX being at such low levels for such a long time, there is strong demand for VIX options, especially on the call side of the board.

 Weekend Review of Volatility Indexes and ETPs – 10/15/2017 at vixtrade.com

Short volatility dominance continues with SVXY up 127% for the year and both VXX and UVXY are down dramatically.

 Weekend Review of Volatility Indexes and ETPs – 10/15/2017 at vixtrade.com

 

Across the suite of volatility indexes quoted by CBOE several rose last week, earnings season is putting some upward pressure on the individual stock volatility indexes.  Silver, the Euro, and EFA (Developed markets outside of North America) were all leaders.

 Weekend Review of Volatility Indexes and ETPs – 10/15/2017 at vixtrade.com

Late Monday, as VXX was spending a little time over 38.00 a trader used Weekly options to take a stand that the early week strength in VXX would not last.  Specifically, they sold the VXX Oct 13th 38 Calls for 0.88 and bought the VXX Oct 13th 50 Calls for 0.11 taking in a credit of 0.77.

 Weekend Review of Volatility Indexes and ETPs – 10/15/2017 at vixtrade.com

Since these options expired on Friday I can show the full outcome of the trade (if held through Friday’s close).  VXX finished the week at 35.34 well below the short strike of 38.00 which places it safely in the profit zone.

 Weekend Review of Volatility Indexes and ETPs – 10/15/2017 at vixtrade.com >

Four Facts to Help Address the Issue – Is the VIX “Low” This Year?

In the past year a number of news reporters and others have asked if the CBOE Volatility Index® (VIX®) was at an unusually “low” level in light of all the worldwide geopolitical uncertainties. The average daily closing levels for the VIX Index are 19.4 since January 1990, but only 12.8 since June 2016.

  • At the 70th CFA Institute Annual Conference in May 2017, Richard Thaler of the University of Chicago opined that the “low” level of the VIX Index was one of the biggest financial mysteries of our time. (Today it was announced that Professor Thaler won the Nobel Prize in economics for his research on how human traits affect individual decisions as well as financial markets.)
  • Early in 2017 the minutes of the Federal Reserve “expressed concern that the low level of implied volatility in equity markets appeared inconsistent with the considerable uncertainty attending the outlook” for President Trump to deliver on pro-growth campaign policies.

Some observers have questioned whether there is too much complacency in the markets, and too little interest in protecting against downside risk in equities. Below are charts and four key facts to help address issues the current levels of VIX Index and perceived complacency in the markets.

SPX HISTORIC VOLATILITY HAS BEEN LOWER THAN THE VIX INDEX

Since June 1, 2016, the avg. daily closing levels were 12.6 for VIX Index, and 8.6 for 20-trading-day historic volatility of the S&P 500 Index (SPX). The S&P has not had huge moves over the past year, and with an average SPX historic volatility of 8.6, an average VIX level above 15 might be difficult to maintain.

1 VIX SPX H V 2 Four Facts to Help Address the Issue – Is the VIX “Low” This Year? at vixtrade.com

VIX FUTURES USUALLY PRICED HIGHER THAN VIX INDEX

Since June 1, 2016, the avg. daily closing levels were 17.2 for the VIX 5-month futures, and 12.6 for VIX Index. Over the past year, the VIX usually has been in contango and the forward expectations of VIX levels usually have been higher than the levels of the VIX Index.

2 VIX futures 1 Four Facts to Help Address the Issue – Is the VIX “Low” This Year? at vixtrade.com

SPX IMPLIED VOLATILITY OFTEN DIFFERS FROM VIX INDEX

 Since June 1, 2016, the avg. daily closing levels were 31.8 for implied vol of SPX options at 80% moneyness (thus higher implied vol for out-of-the-money SPX protective puts), and 12.6 for VIX Index. While the early-2017 Federal Reserve minutes  “expressed concern [about] the low level of implied volatility in equity markets,” it is worth noting that the SPX implied volatility levels at both 80% and 90% moneyness (corresponding with out-of-the-money puts used for portfolio protection) generally were much higher than the VIX levels. It appears that some investors have quite a bit of interest in vehicles that can be used to hedge big downside risk.

Since June 1, 2016, the avg. daily closing levels were 12.6 for VIX Index, and 10.0 for the 30-trading-day implied volatility of at-the-money SPX options. While some people question whether VIX is too low, it is worth noting that the average levels for Bloomberg’s estimate of A-T-M implied volatility were 2.6 points lower than the VIX Index.

3 VIX implied 1 Four Facts to Help Address the Issue – Is the VIX “Low” This Year? at vixtrade.com

 

CBOE SKEW INDEX RECENTLY IS HIGHER

The avg. daily closing levels for the CBOE SKEW Index are 118.9 since January 1990, but a much higher 132.0 since June 1, 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. www.cboe.com/SKEW Implied volatility for O-T-M SPX puts (used for portfolio protection) generally recently has been much higher than implied vol for A-T-M SPX options.

4 SKEW Oct 6 Four Facts to Help Address the Issue – Is the VIX “Low” This Year? at vixtrade.com

VIX EVENT IN CHICAGO ON OCT. 19

An upcoming event on Current Dynamics of the VIX Market will be held at 4:00 p.m. CT on Thursday, October 19, at CBOE. For more information and to register, please visit http://bit.ly/VIX-Oct-19 – the event is for financial professionals only.

MORE INFORMATION

More information on how VIX-related products can help with management of your portfolio is at www.cboe.com/VIX and www.cboe.com/volatility.

 

 Four Facts to Help Address the Issue – Is the VIX “Low” This Year? at vixtrade.com >

Weekend Review – VIX Options and Futures – 10/8/2017

Despite closing at an all-time low on Thursday and the S&P 500 gaining over 1% last week, VIX was slightly higher when the dust settled Friday.  The same cannot be said for the VIX futures curve where all contracts lost value last week.  It should be noted that despite the low level (or because of the low level of VIX), VVIX close just shy of 100 last week.

 Weekend Review – VIX Options and Futures – 10/8/2017 at vixtrade.com

VIX Weeklys continue to become a bigger part of the VIX story with non-standard expirations continuing to experience volume growth.  On Tuesday last week a fairly sizable trade using the November 1st VIX Weekly options came into the pit on the 3rd floor at CBOE.

With VIX around 9.55 and the November 1st VIX Future at 11.70 there was a buyer of 2,780 VIX Nov 1st17 Calls at 0.40 who sold 5,460 VIX Nov 1st 21 Calls for 0.24 each resulting in a net credit of 0.08 per 1 x 2 spread.  The payout at expiration and half way to expiration appears on the diagram below.

 Weekend Review – VIX Options and Futures – 10/8/2017 at vixtrade.com

It’s hard to see, but anywhere below 17.00 at November 1st settlement results in a profit equal to the credit taken in on this trade.  Things improve from 17.00 up to 21.00, then work lower until over 25.08 where the trade will result in a low.  The purple line shows the payoff with 10 days remaining to expiration based on the price level of the November 1st future.  Note that line moves up even before the long strike is reached.

 Weekend Review – VIX Options and Futures – 10/8/2017 at vixtrade.com >