Cboe Blogs

Another big bullish VIX trade came into the pit today, with VIX just over 10.00 and the October futures at 12.20, a buyer of about 100,000 VIX Oct 17 Calls came into the market paying 0.45 for the whole lot.  The trade got divided up around the pit in several pieces, which shows up in the time and sales from LiveVol below.  There’s just under 3 weeks October 18th when these options settle on the market open so the buyer is either speculating on a volatility spike, or guarding against[...]

On September 25th a new daily volume record of 2.61 million contracts was set for options on the CBOE Volatility Index® (VIX®), as the VIX Index rose 6.5% to close at 10.21 that day. TOP TEN VOLUME DAYS FOR VIX OPTIONS Four of the top ten days for VIX options volume occurred in 2017. NEWS COVERAGE OF TRADING ACTIVITY IN VIX OPTIONS AND VIX FUTURES Recent news coverage has highlighted investor use of both VIX options and VIX futures. A September 25 news story in Reuters entitled “VIX[...]

Back in the day, when I was a lad in Junior High School, the Dead Kennedys remade the theme to the TV show Rawhide.  The song begins, “Rollin’ rollin’ rollin’”, which is the ear worm I get when I see a trade like we had in the VIX pit today.  Specifically, an October spread that got put on in July was rolled out to December.    The first part of the story begins on Friday July 21st when a trader initiated a spread that sold 1 VIX Oct 12 Put for 0.75,[...]

Everyone knows the equity markets have been putting up a solid 2017.  The S&P 500 is up about 12% and developed markets, excluding North America, as measured by the MSCI EAFE (MXEA) Index is up about 17.5% for 2017.  However, emerging markets, as displayed by the performance of the MSCI Emerging Markets Index (MXEF) has gained almost 29%.  The chart below shows the performance for MXEF in 2017.     A big trade came into the MXEF post at CBOE yesterday that seems[...]

As I have learned and taught about technical analysis over the years, it is certainly not a sophisticated science.  If you have a set of eyes, can see recognizable patterns that repeat over and over again we can draw some conclusions, and from that high probabilities of success.  There are no guarantees of course, but I'll take the high odds of human behavior repeating over and over  again. A couple of coincident indicators I look at include new highs/lows and the bullish percent indicator. [...]

VIX threatened to close the week with a 9 handle, but managed to stay out of single digit territory.  Spot VIX was down over 16% and the standard September futures contract which goes off the board on the open Wednesday was down 16% as well.  There’s still a premium of 0.95 between spot and September VIX, but the gap that has persisted until recently is closing.  October, which will take over as the front month, remains at a premium of about 1.75.  Friday was fairly quiet,[...]

Small cap stocks had a great week last week with the Russell 2000 (RUT) rising 2.25% which the large cap focused Russell 1000 (RUI) was up about 1.6%.  For the year RUI still has just over a 6% lead on RUT. Small cap volatility as measured by the CBOE Russell 2000 Volatility Index (RVX) has spent most of 2017 at a historically high premium relative to large cap volatility, best depicted by VIX.  The chart below shows RVX basically crashing to the lowest levels seen in 2017 last week. [...]

Ever make a sandwich so big and poorly constructed that the second you pick it up, the insides propel themselves out and all you're left with is a few pieces of dry toast?  Me neither, but I can envision it happening.  Keep stacking the vegetables without regard to sound principles of sandwich engineering and you may end up with a floor salad.  Well, I set out to make a short sandwich (reverse collar, you could also call it) on Tuesday, September 12th, hoping for the best, as always,[...]

Henry Schwartz, President of Trade Alert led a panel discussion on Sourcing Liquidity in Index Options today at RMC in Europe.  The panelists were: Kristin Boyd, Director, Credit Suisse William Ellington, Managing Partner, X-Change Financial Access LLC Stacey Gilbert, Head of Derivatives Strategy, Susquehanna Sander van Zelm, Head of Institutional Trading, Optiver Henry started things off giving an overview of the US options industry.  He noted that indexes (specifically[...]

Nick Cherney, Head of Exchange Traded Products at Janus Henderson and Pete Clarke, Global Head of Equity Derivatives Strategy at UBS split duties for a session titled Design and Trading of US and European Volatility Related ETPs at RMC today. Cherney kicked things off giving a history of VIX related ETPs and demonstrating the tremendous growth of these markets.  He also noted the VSTOXX futures market is growing, but that the size of that market is much smaller than the VIX futures market. [...]

The first session on the final day at RMC was a panel discussion titled, Panel on Long and Relative Value Volatility Trading and Tail Risk.  The panel was moderated by Paul Leech from JP Morgan and panelists, who represented all major regions of the globe, were David Dredge CIO Convex Strategies at City Financial Investment Company Oleg Lugovkin, Portfolio Manager, Argentiere Capital Chris Rodarte, Portfolio Manager, Pine River Capital Management Pierre de Saab, Partner and[...]

The Evolving Dynamics of VIX Futures was one of the most anticipated presentations today at RMC Europe and Alex Orus from Principalium Capital and Erkki Slide from Independent View met all expectations.  Slide noted the current low volatility environment and attributed a combination of the current equity market environment, low individual stock specific volatility, low correlations among S&P 500 constituents, and the trade-off between variance risk premium and tail risk as being factors[...]

In one of the final sessions today at CBOE RMC Europe Riddhi Prasad from Deutsche Bank and Arne Staal of Standard Life Investments delivered a talk titled Designer Dispersion: Identifying Optimized Risk Premium.   The pair discussed dispersion trades for extracting risk adjusted value which is separate from the volatility risk premium.  They also discussed what drives performance in different volatility regimes.  By ‘designer dispersion’ they are referring to using optimized[...]

Kokou Agbo-Bloua from Societe Generale and Natasha Sibley of Henderson Global Investors shared duties in a discussion titled How to Hedge Cross-Asset Portfolios with Risk Transfer this afternoon at CBOE RMC Europe.  They explored how the hedging needs from different investors such as pension funds, asset managers, and insurance companies are drivers of the supply and demand of market correlations.  These hedging needs may result in various trading opportunities.  Natasha showed how[...]

Philip Stafford from the Financial Times moderated a panel on Market Structure for Equity, Equity-Related Options and Volatility Products and FX today at RMC Europe.  The panelists were: Bryan Christian, SVP, Head of US Sales, Bats Global Markets, CBOE Holdings Eric Frait, Vice President, Business Analysis, CBOE/CFE, CBOE Holdings Mark Hemsley, CEO, Bats Europe, CBOE Holdings Paul Millward, Head of FX Product Strategy, CBOE Holdings A topic of interest in Europe is the pending[...]