Cboe Blogs

After showing some signs of life VIX fell back to a single digit closing handle three out of four days last week.  The curve shifted in a very parallel fashion as even the longer dated futures gave up some ground.  The trade of the week is a simple yet effective strategy.  ON Monday morning as VIX was trading around 11.20 there was a buyer of the VIX Nov 22nd 13 Puts for 1.70.  Remember VIX options are priced off the corresponding futures contract, but settle in a calculation[...]

The VXST – VIX – VIX3M – VXMT curve shifted lower with even VXST, which was under extra holiday week pressure going into the 11/17 close, losing value last week.  Looking at VIX3M and VXMT one might think traders expect 2018 to be a continuation of what we’ve had in 2017, at least to start the year. The long funds resumed their downward move while the short funds bounced as they do following any short lived strength in volatility (I have a hard time calling a move to[...]

Small cap stocks finished the week up about 1.8% when measured by the Russell 2000 (RUT) while large caps had a good week as well with the Russell 1000 (RUI) moving up by about 1%.  For the year RUI is still ahead of RUT, but small caps are trying to close the gap. We got quite a move higher in the relationship between the Cboe Russell 2000 Volatility Index (RVX) and VIX.  Sometimes this is attributed to a rise in RVX, but more often it is due to a drop in VIX and that was the case last[...]

Wednesday I conducted a webinar for Interactive Brokers discussing ratio spreads.  During the presentation I was asked about initiating 1 x 2 and what expirations and strike combinations would result in a credit.  Another stipulation was that the trade would buy one at-the-money option and sell two out-of-the-money options.  I wasn’t asked for a call or put spread, so I did both with each expiration.  With so many moving parts to that question I responded that I would investigate[...]

VIX showed signs of life last week with a move to the lower teens.  November settlement Wednesday morning came in at the highest level (13.79) since April.  However, when the week came to an end VIX finished only 0.14 higher.  The VIX futures rose slightly as well, with the farther dated futures uncharacteristically gaining more than the nearer dated contracts.  Monday with VIX around 11.50 and the November 29th VIX future at 11.90 a trader put on a position that looks like[...]

What the heck is going on with VXST on the chart below?  Basically Thanksgiving.  As a nine-day measure of SPX implied volatility this index takes into account options that have their implied volatility under pressure to adjust for extra time decay since we have Thursday off and a half day this coming Friday.  I have a funny feeling this time next week VXST will have fallen back in line (or contango) with the other indexes below.  The long funds were a bit lower last[...]

Small caps ruled the day last week as the Russell 2000 (RUT) rose 1.24% while the Russell 1000 (RUI) was down 0.11%.  For the year RUI is up over 15% while RUT still lags at up 10%.  The relationship between the Cboe Russell 2000 Volatility Index (RVX) and VIX remained at low levels as small caps were in favor.  I know hindsight is easy, but we can learn from it and the dramatic drop in the RVX / VIX ratio a couple of weeks ago may have been a precursor to the solid relative[...]

S&P 500 volatility rose across the four volatility indexes based on SPX option pricing this past week.  The short side of the equation was up strong and the longer dated indexes (VIX3M and VXMT) had good weeks as well.  It may just be some concern is finally returning to the equity markets.   The long funds had solid weeks with the unleveraged ETPs gaining 3% to 7%, with the big winner being EVIX which is based on VSTOXX futures trading.  The short funds gave up almost the[...]

Small caps fell farther behind last week as the Russell 2000 (RUT) was down 1.37% while the Russell 1000 (RUI) was down only 0.24%.  For the year RUT is now up 8.71% while RUI has gained a very respectable 15.21%.  This time last week the CBOE Russell 2000 Volatility Index (RVX) premium relative to VIX was at 2017 highs.  Despite the fall off in RUT compared to RUI, the ratio experienced a pretty dramatic drop.  We are going to attribute that to the rise in VIX more than an[...]

VIX rose over 20% last week and the futures curve followed, but not nearly to the extent as the spot index.  The November contract goes off the board on the open Wednesday finishing the week at only a 0.31 premium to the spot index.  Usually the December contract is conspicuously low relative to spot VIX at this time of year as no one is concerned about the holidays and there are a few extra non-trading days associated with VIX around December expiration.  However, the over 2 point[...]

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[...]

With Apple's stunningly strong earnings report, higher guidance and off the charts opening sales for the new X phone in place, the company rose smartly last week, peaking at a valuation never seen or heard before - 900 billion dollars!  Just under 10% more and this will be the first company ever valued at over 1 trillion dollars.  It has been a great ride for Apple, its shareholders and employees.  For 2017 the stock is up a whopping 50%.  To put that into perspective, at the[...]

Every job has the things you ‘have to do’ and those that you ‘get to do’.  I know I have worn this line out, but I cannot think of a better way to describe what the Cboe Risk Management Conferences mean to me.  The schedule for this year’s Asian version of RMC was posted on Friday and as always the lineup is very strong with respect to both the quality of speakers as well as the topics that will be covered in Hong Kong on December 5th and 6th.  Day[...]

VIX closed on an all-time low Friday and VXST was lower on the week as well, but note the right side of the VXST – VIX – VIX3M – VXMT curve where we had a slight rise in both the longer dated S&P 500 related volatility indexes.  The long ETPs were looking good on Monday, but they managed to give it back and more by the end of the week.  Even SKEW and VVIX, which have been holding up relative to VIX most of 2017 are starting to work lower.  Across the spectrum[...]

The Russell 2000 (RUT) had a tough week, losing almost 1% while the large cap focused Russell 1000 (RUI) managed to rise by 0.26%.  The outperformance of large versus small caps was threatened toward the end of the third quarter, but RUI is up 2.65% versus only a 0.27% rise for RUT in the fourth quarter. Due to very low VIX and a rise in the CBOE Russell 2000 Volatility Index (RVX) last week, the RVX / VIX relationship finished the week with RVX at over a 60% premium to VIX.  This happened[...]