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The Weekly News Roundup is your weekly recap of CBOE features, options industry news and VIX Index and volatility-related articles from print, broadcast, online and social media outlets.
MXEF Options Manage Global Equity Exposure
On Tuesday, MSCI Inc. announced that beginning June 2018, it will include China A -Shares in the MSCI Emerging Markets Index (MXEF).
CBOE offers options on the MXEF Index for investors who wish to manage global equity exposure. Cash-settled MXEF options[...]
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VXST was slightly higher while the rest of the SPX related volatility indexes dropped last week. All moves were relatively small as we have truly entered the summer doldrums, at least for broad based index volatility.
There’s very little exciting on the table below. TYVIX bumped up slightly, but is still at very low levels. VVIX remaining over 80.00 is interesting as traders may continue to take advantage low VIX to get long volatility exposure through buying calls or spreads[...]
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VIX was a bit lower to end the week and the curve moved down as well. We retired June last week and now July is the front month and is at a premium of just over 1.80 to finish the week.
Before getting into a trade I would like to point out some heavy activity that abounded last week in the VIX Weekly options expiring this coming week. There was a pretty big buyer of the VIX Jun 28th 19, 20, and 21 Calls paying 0.10 for the 19’s and 0.05 for both the 20’s and[...]
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The Russell 2000 (RUT) was up by 0.57% last week while the large cap focused Russell 1000 (RUI) gained only 0.23%. For the year RUT is now up 4.25% while RUI has gained 8.84% as large cap stocks continue to dominate 2017 after the huge outperformance of small cap stocks from election day to the end of 2016.
On Monday RVX closed below 14.00 for the first time in years. Finishing the day at 13.89 was also a 2017 low for RVX (kind of makes sense if we haven't been below 14.00 for[...]
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On June 20 MSCI, Inc. issued an announcement that noted (in part) –
“ … beginning in June 2018, it will include China A shares in the MSCI Emerging Markets Index and the MSCI ACWI Index. This decision has broad support from international institutional investors with whom MSCI consulted, primarily as a result of the positive impact on the accessibility of the China A market of both the Stock Connect program and the loosening by the local Chinese stock exchanges of pre-approval[...]
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Today may be the longest day of the year, but I’m already looking forward to a post-Labor Day event, specifically the 6th Annual European version of CBOE’s Risk Management Conference which will be held September 11th through 13th. This year we will be visiting a new location just outside London, The Grove Hotel which appears to be an ideal setting for discussing all things derivatives and volatility.
Day one kicks off with a discussion titled New Developments in Options[...]
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Facebook Bull Put Spread
With FB trading at 151.95 someone sold 200 FB Jun 30th 152.50 Puts for 2.44 and bought the FB Jun 30th 146.00 Puts for 0.60 and a net credit of 1.84. A quick summary appears in the video below.
At expiration the net result with FB above 152.50 would be a profit of 1.84, equal to the credit taken in on the trade. The worst case scenario is a loss of 4.66 and this trade has a break-even of 150.66.
Other trades of note:
With Bank of America (BAC)[...]
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For managers of global index portfolios this week, a big issue is whether or not MSCI will add China A-Shares to the MSCI Emerging Markets Index (MXEF). MSCI plans to announce its 2017 Market Classification Review on Tuesday, June 20, shortly after 4:30 p.m. EDT.
A June 17 headline to a Barron’s story stated --
“Will China Gain Entry to MSCI Indexes? The giant indexer has said no three years in a row, but this time may be different. Approval would offer a nice boost to China’s[...]
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Remember as a kid playing pickle? This is the game where say on a baseball field you are in a rundown between two bases, and players on the other team are trying to tag you out. You run back and forth, dodge, duck and swerve to avoid a tag and make it safely to one of two bases. It's a thrilling game and often filled with surprising moves.
There are market trading strategies that are similar to the game of pickle, and we do our best to stay away from the tag that puts us out of[...]
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This is a big week for the FTSE Russell suite of indexes. On Friday, a large number of indexes will undergo what is referred to as the annual reconstitution. Specifically, the final phase of this process will occur on the market close Friday as stocks move into or out of indexes. The index we care most about at CBOE is the Russell 2000 which is the standard benchmark index for small cap managers in the US. Also, RUT options are the 3rd most actively traded broad based index[...]
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The Weekly News Roundup is your weekly recap of CBOE features, options industry news and VIX Index and volatility-related articles from print, broadcast, online and social media outlets.
Symbol of Change
On May 1, CBOE changed the symbol for existing SPXPM options series to option symbol SPXW. As a result, CBOE is offering both SPX options with a.m. settlement, and SPXW options with p.m. settlement, on third Fridays of the month.
The conversion is designed to[...]
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VIX gave volatility bulls a little hope on Monday rising to the highest intra-day level since VIX was receding from the news flow that followed the firing of Comey by Donald Trump in the middle of May. However, as is the norm, VIX dropped and worked lower with the curve following in suit.
As Monday was the only day of real strength for VIX and the June VIX futures. One trader took advantage of that by selling an out of the money call spread. Late Monday as VIX was near 11.65 and[...]
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As the week came to a close VXST which measures 9-day volatility expectations took a dive. Hence the big drop on the left side of the VXST – VIX – VXV – VXMT diagram below.
TYVIX finished the week below 4.00 which was a first for 2017, but not outside of the long term historical range. I checked the market expectations for the next FOMC meeting in late July and right now we have a 100% chance of nothing happening. That much certainty probably justifies[...]
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Small cap stocks lost some of the recently gained ground relative to large cap stocks last week. The Russell 2000 (RUT) was down over 1% while the large cap focused Russell 1000 (RUI) was up slightly. The spread of RUI to RUT out performance for 2017 has now widened to almost 5%.
Despite the tough week for small cap stocks the CBOE Russell 2000 Volatility Index (RVX) finished Friday at a 2017 low. This lower relative level for RVX pushed the RVX to VIX ratio to the lowest[...]
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In regard to the popular S&P 500® options, on May 1, 2017, CBOE changed the symbol for existing SPXPM option series to option symbol SPXW. Beginning last month, CBOE is offering both SPX options with a.m.-settlement, and SPXW options with p.m.-settlement, on third Fridays of the month. This conversion was designed to allow greater ease of access for those looking to place spreads from week to week. We have received some very positive feedback from institutional investors on this change[...]