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.
Beware of the Swan
The term “Black Swan” is used to describe an unexpected event of large magnitude and consequence. The CBOE Skew Index (SKEW) is often used to gauge the likelihood of a black swan-type event occurring. Calculated from weighted strips of out-of-the money S&P 500 options, the SKEW Index typically rises to higher levels as investors become more fearful of such an event. The value of SKEW increases with the expected tail risk of S&P 500 returns. Recently, the SKEW Index hit an all-new record high of 154.34 indicating a possible shift in investor sentiment. If there were no tail risk expectations, SKEW values would normally close around the 100-range.
For more information, visit www.cboe.com/skew.
“The ‘Crash Protection’ Index is Sending a Warning Flare for the Market – or Not” – Alex Rosenberg, CBNC
“How to Play Microsoft through a Covered Call” – Kevin Kelly, Bloomberg Television
“A Popular Stock-Market ‘Black Swan’ Gauge is at a Record” – Mark DeCambre, Market Watch
Brexit’s 50/50 Effect
On Wednesday, Bats Europe, a CBOE company, announced the launch of two new indices – the Bats Brexit High 50 and Bats Brexit Low 50 - that are designed to measure the impact of Brexit on UK companies. The two indices are designed to act as barometers for assessing how Brexit is impacting companies with higher and lower revenue exposures to the UK.
For more information, view the press release.
“Bats Europe Launches Brexit Benchmarks” – Merle Crichton, FOW
VIX Fix: Prescribed Volatility
The delay to this week’s Congressional vote on a healthcare replacement bill created even more uncertainty in the market, causing the “Trump Rally” to lose some stream and placing the health of the 8-year bull market in squarely in question. On Tuesday, the Dow Jones Industrial Average (Dow) saw its steepest single-day decline since September, falling 237.85 to close at 20,668.01. After closing below the 13 level for 54 consecutive sessions, the CBOE Volatility Index (VIX), hit a 2017 high on Thursday, closing at 13.07, its highest close of the year. So as investors adopt a ‘wait and see” approach on market direction, investors’ prescriptions for volatility might be getting filled.
“Volatility May Be Low, But VIX Trading is All the Rage” – Ben Eisen and Gunjan Banerji, The Wall Street Journal
“Always a Change of Storms with Volatility” – Russell Rhoads, ETF.com
“The VIX Signal Flashing for the First Time in a Decade” – Karee Venema, Schaeffer’s Investment Research