Several recent news stories have covered this topic - how can investors protect their portfolios in the event of stock market moves during and after the U.S. election on November 8?

For investors who are concerned that stock indexes could decline and volatility indexes could soar in future weeks, two of the simpler index option strategies to consider are (1) buying S&P 500 (SPX) protective put options, and (2) buying call options on the CBOE volatility Index (VIX). In the charts below, not that the recent open interest was 9 million for SPX puts and 4.7 million for VIX calls.

1

2

HIGHER IMPLIED VOLATILITY FOR SPX OPTIONS WITH NOV. 9 EXPIRATIONS

In the Livevol SPX volatility skew chart, below, note that the Livevol estimates for implied volatility are generally much higher for SPX options expiring on Wednesday, Nov. 9 (when compared to the Monday, Nov. 7 expirations).

mm1

Similarly, the table with select Bloomberg estimates below shows that some of the SPX put options expiring on Nov. 9 had implied volatilities that were about 8 points higher than the implied volatilities for SPX options expiring on Nov. 7.

4

Not also in the next table the higher implied volatility for some key VIX O-T-M call options that expire on Nov. 9 (versus the options that expire on Nov. 2 and Nov. 16).

5

CBOE SKEW AND VVIX INDEXES 

While many observers focus primarily on the movements of the VIX Index, other key metrics include the CBOE’s VVIX and SKEW indexes; in recent days both the VVIX and SKEW indexes have been higher than their long-term averages (since Jan. 2007) of 122.2 for SKEW and 87.6 for VVIX.

6

MORE INFORMATION 

To learn more about managing your portfolio with index options, please visit the Education tab at the CBOE website.

Qualified institutional investors also are welcome to register at www.cboermc.com for an upcoming Risk Management Conference hosted by CBOE –

  • RMC Asia 2016: Nov 30 - Dec 1, 2016 at the Conrad Hong Kong Admiralty, Hong Kong
  • RMC US 2017: Wednesday – Friday, March 8 – 10, 2017 at the St. Regis Monarch Beach, Dana Point, California