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[...]
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[...]
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[...]
On June 1st the CBOE Volatility Index® (VIX®) closed at 9.89. June 1st marked only the 14th day on which the VIX Index closed below 10 (its price history begins in 1990). Six of the 14 days on which the VIX Index closed below 10 occurred in 2017 (see Exhibit 1 below for a list of all 14 dates).
REMARKS AT CFA ANNUAL CONFERENCE
On May 21 through 24 I listened to several outstanding speakers 70th CFA Institute Annual Conference in Philadelphia. Speakers’ remarks that were among the most[...]
By Matt Moran
This week I received inquiries about the trends in options volume.
The large-sized SPXW Weekly options have successfully seen volume growth over each the past seven years. Key points about SPXW Weekly options include –
VOLUME. Average daily volume (a.d.v.) in the first four months of 2017 was 500,964 contracts, (up 30% over the a.d.v. for the full year of 2016; see Exhibit 1 below);
MANY EXPIRATIONS. SPXW Weeklys options have expirations on ten upcoming dates in May[...]
CBOE is planning a change to the symbol for existing SPXPM option series to option symbol SPXW in both the Regular Trading Hours (RTH) and Extended Trading Hours (ETH) session. The change is scheduled to be effective May 1, 2017. This conversion is 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 to the symbol SPXW.
After the conversion, on standard expiration[...]
At the 33rd Annual CBOE Risk Management Conference in California last week, several speakers discussed ways to use sentiment analysis and the volatility risk premium in their quest to add alpha and enhance the risk-adjusted returns of their portfolios.
I am pleased to report that two upcoming events will provide more details and analysis of the topics of developing investable and actionable intelligence from analysis of sentiment trends on social media, and generating attractive risk-adjusted returns[...]
Investors recently have shown increased interest in protection from large peak-to-trough drawdowns in their portfolios.
In the 27 years from 1990 through 2016, the average value of the CBOE SKEW Index (SKEW) was 118.4, but in the 20 recent trading days since January 13, the SKEW Index averaged 134.5, and ranged between a low of 128.80 and a high of 146.33. A high SKEW Index value could be indicative of high demand for S&P 500® (SPX) protective put options. www.cboe.com/SKEW.
With U.S. stock market indexes recently hitting all-time highs, there is quite a bit investor uncertainty about the markets and there is high demand for protection from large market declines. One metric providing evidence of this high demand is the CBOE SKEW Index (SKEW). In the 27 years from 1990 through 2016, the average daily level for the SKEW Index was 118.4, and the average level of SKEW never topped 130 in any of those 27 years. In the year 2017 (through February 7) the average daily level[...]
In recent months many press stories have covered the topic of how Twitter tweets possibly could influence the prices of stocks or the direction of the economy. News reports indicate that there are hundreds of millions of tweets posted per day. One challenging question for investors could be – can useful actionable information be gleaned from Twitter postings to identify stocks that have positive bullish sentiment?
One tool that has potential to be useful to investors is the CBOE-SMA Large Cap[...]
The CBOE SKEW Index (SKEW) values, which are calculated from weighted strips of out-of-the-money S&P 500 options, generally rise to higher levels as investors become more fearful of a negative equity “black swan” event — an unexpected event of large magnitude and consequence.
Key facts about recent SKEW values --
TWO DAYS IN A ROW. SKEW closed at 143.43 on January 18, and 141.03 on January 19 (the sixth time in its 27-year history that the index closed above 140 two days in[...]
CBOE index products continue to attract growing interest from investors who wish to manage the income and volatility in their portfolios. A recent press release by CBOE Holdings noted that --
“… Several trading records were set [in 2016]. Total volume and average daily volume (ADV) in index options trading at CBOE reached new all-time highs for the fourth consecutive year in 2016 with 430.7 million and 1.7 million contracts, respectively, each up 6 percent from 2015. Total volume and[...]
Investors now have access to price histories for several CBOE benchmark indexes that date back 30.5 years. The first two charts below show that since mid-1986 both the CBOE S&P 500 30-Delta BuyWrite Index (BXMDSM) and CBOE S&P 500 PutWrite Index (PUTSM) had higher returns than the S&P 500® Index, 30-Year Treasury Bond Index (Citi), MSCI EAFE® Index, and S&P GSCI Index.
HIGHER RETURNS AND LOWER VOLATILITY
The Annualized Returns and Standard Deviations bar graphs below show[...]
CBOE offers more than 25 volatility indexes<http://www.cboe.com/micro/volatility/introduction.aspx> that can serve as valuable tools for investors who wish to gauge intra-day and long-term sentiment changes related to a variety of asset classes. In addition, investors take long and short positions in futures and options on key volatility indexes.
The tables and seven graphs below provide an overview of the 2016 performance of 18 of CBOE’s volatility indexes and the CBOE SKEW Index. Key[...]
More than fifteen CBOE strategy benchmark indexes (including BXD, BXM, BXMC, BXMD, BXMW, BXR, BXRC, BXRD, BXY, CLL, CLLR, CLLZ, CMBO, PUT, PUTR, RXM, VPD, VPN, and WPUT) hit all-time daily closing highs on December 20.
As shown in the first graph and table below, the CBOE Russell 2000 30-Delta BuyWrite Index (BXRD) rose 9% since the November 8 U.S. election (through December 20).
The relatively strong performance of the BXRD Index over the past five weeks possibly could be attributed[...]