• Trader Talk | Cboe Benchmark Indexes | Jul 6, 2018, 3:47 PM

    32 Years of Performance History for 10 Benchmark Indexes That Use S&P 500 Options – Lower Volatility and Enhanced Risk-Adjusted Returns

    32 Years of Performance History for 10 Benchmark Indexes That Use S&P 500 Options – Lower Volatility and Enhanced Risk-Adjusted Returns

    This is the 4th in a series of blogs at www.cboe.com/blogs to commemorate the 35th anniversary of the launch of SPX options on July 1, 1983. #SPX35 In 2001 some portfolio managers who engaged in strategies that used S&P 500® (SPX) options told me that pension fund sponsors suggested that the options industry should develop indexes that could serve as benchmarks for options-based performance. In 2002 Cboe worked with Professor Robert Whaley to introduce the first major benchmark index that[...]

  • Trader Talk | Trade Ideas | Cboe Benchmark Indexes | Jul 5, 2018, 8:06 AM

    Portfolio Protection with Cboe’s S&P 500 Options: Overview of Basic Concepts

    Portfolio Protection with Cboe’s S&P 500 Options: Overview of Basic Concepts

    Many investors are asking questions about how to protect their investment portfolios in light of a number of developments, including (a) the potential for global trade wars, (2) low interest rates for fixed income investments and high price-earnings ratios for key stocks, and (3) the most severe peak-to-trough drawdowns a decade ago were down 51% for the S&P 500 Index, down 62.7% for the MSCI Emerging Markets Index, and down 81% for the S&P GSCI Index.    Strategies using S&P[...]

  • Trader Talk | CBOE Memories | Jul 2, 2018, 10:50 AM

    35 Years of S&P 500 Index Options Trading at Cboe

    35 Years of S&P 500 Index Options Trading at Cboe

    Ten years after creating the listed options market in 1973, Cboe revolutionized the financial world once again with the introduction of options on broad-based stock indexes.  On July 1, 1983, Cboe launched trading on S&P 500 Index options (SPX).  In 35 years, Cboe’s SPX options have grown from a modest beginning to the most-actively traded index option in the U.S.         Despite less-than-impressive early volumes – a mere 350 contracts traded[...]

  • VIX | Trader Talk | Jun 6, 2018, 2:59 PM

    Bullish VIX Trades from Yesterday

    Bullish VIX Trades from Yesterday

    Yesterday VIX finished the day at 12.40 which is the lowest close since late January. The June VIX futures dropped 0.40 to 13.65 and the July contract closed at 14.50, down 0.25 on the day. With VIX at the lowest levels since before the market action in early February, we actually saw some bullish VIX spread trades come into the pit at the Cboe Options Market. Trade 1 – Fifteen minutes into the day VIX was at 12.59 and the June future at 13.90. There was a buyer of 4500 VIX Jun 14 Calls[...]

  • Market News | Trader Talk | Jun 1, 2018, 11:17 AM

    Russell Index Annual Reconstitution

    Russell Index Annual Reconstitution

    Considering there’s approximately $8.5 trillion in assets benchmarked to the Russell U.S. Indexes, the Russell Reconstitution is a major event.  Each year Russell Indexes are reconstructed to accurately reflect the U.S. equity market and its segments (market cap. & style). Designed to capture changes, the reconstitution accounts for new companies introduced via IPOs, market values of companies increasing/decreasing, share adjustments, etc. Once a year, equity portfolios benchmarked[...]

  • VIX | Trader Talk | Trade Ideas | Mar 17, 2018, 3:40 PM

    Weekend Review of VIX Options and Futures March 16th 2018

    Weekend Review of VIX Options and Futures March 16th 2018

    VIX gained a bit (about 8%) last week as the S&P 500 was under pressure.  The curve shifted in a pretty uniform manner with March adding just over 3% as contango was fairly steep on Friday the 9th.  As a friendly reminder, March contracts settle on the open this coming week.  Short volatility has gotten bad rap lately due to recent price action.  However, short volatility, when done in a risk controlled manner, can be a viable trading strategy all types of markets. [...]

  • VIX | Trader Talk | Trade Ideas | Mar 11, 2018, 11:44 AM

    Weekend Review of VIX Options and Futures March 9th 2018

    Weekend Review of VIX Options and Futures March 9th 2018

    The 25% drop in VIX last week may seem extreme, but it isn’t even in the top 10 of weekly losses for VIX (it is 11th).  The all-time record was the last week in June 2016 with a 42% week over week loss.  Note the big drop in futures along with a return to contango.    And now a whale update.  Before getting into this trade here’s a little background. The first part of the story begins on Friday July 21st when a trade was initiated that sold 1 VIX Oct 12 Put for[...]

  • VIX | Trader Talk | Trade Ideas | Mar 11, 2018, 10:33 AM

    Weekend Review Russell 2000 Options and Volatility March 9th 2018

    Weekend Review Russell 2000 Options and Volatility March 9th 2018

    Stocks had a great week last week with the Russell 2000 (RUT) gaining over 4% and Russell 1000 (RUI) rising about 3.5%.  For the year RUT is up 4.01% while RUI is up 4.16%.  As you can see below small caps took the 2018 performance lead for a day last week.  The magnitude of the gain of over 4% for RUT this week is becoming commonplace.  Four of the nine weekly moves for RUT in 2018 have been outside of +/- 3% while there were no moves greater than +/-3% in 2017.  Welcome[...]

  • VIX | Trader Talk | Trade Ideas | Mar 3, 2018, 2:52 PM

    Weekend Review of Russell 2000 Options and Volatility - March 3, 2018

    Weekend Review of Russell 2000 Options and Volatility - March 3, 2018

    Small cap stocks are playing catch up by not losing as much as large caps.  Last week the Russell 2000 (RUT) was down about 1% while the large cap focused Russell 1000 (RUI) lost just under 2%.  RUI’s lead has narrowed to 0.75%.  Since RUT stocks are more domestic in nature, I’m going to go out on a limb and say the trade war rumblings put more pressure on RUI that RUT last week. We have experienced an unprecedented run in the relationship between the Cboe Russell 2000[...]

  • VIX | Trader Talk | Trade Ideas | Mar 3, 2018, 12:34 PM

    Weekend Review of VIX Futures and Options - March 3, 2018

    Weekend Review of VIX Futures and Options - March 3, 2018

    The S&P 500 was down just over 2% last week and VIX does what it does (rose) when the S&P 500 is under pressure.  VIX was up over 18% and to a lesser extend the futures markets followed higher.  Worth noting above is the settlement price for March futures on Friday at 19.025.  This contract does not expire until the 21st, so there’s plenty of time for VIX to come back down a bit.  Usually when VIX moves up like it did and there’s this much time left to expiration[...]

  • VIX | Trader Talk | Feb 14, 2018, 5:02 PM

    VIX Today - February 14, 2018

    VIX Today - February 14, 2018

    The S&P 500 finished the day higher for the fourth day in a row and VIX dipped below 20.00 for the first time since February 5th.  The chart below shows that as the S&P 500 moved up over the day as VIX worked lower.  What is referred to commonly as the ‘fear index’ is starting to indicate there is less fear in the market than we experienced last week.    Today marked expiration day for standard February VIX and Options with both settling at 21.87[...]

  • VIX | Trader Talk | Trade Ideas | Feb 12, 2018, 8:23 AM

    Weekend Review of VIX Options and Futures Feb 10 2018

    Weekend Review of VIX Options and Futures Feb 10 2018

    For the past few months writing this weekend review has been a difficult task.  How many different ways can I say VIX is low and reflecting low realized volatility in the S&P 500?  The past couple of weeks it has suddenly gotten much easier to talk about VIX.  Last week was the first one week drop of greater than 5% since early January 2016.  The weakness actually began two weeks ago and the S&P 500 has given up 8.8% in the past two weeks is the biggest two week drop[...]

  • VIX | Trader Talk | Trade Ideas | Feb 12, 2018, 8:08 AM

    Weekend Review of Volatility Indexes and ETPs Feb 10 2018

    Weekend Review of Volatility Indexes and ETPs Feb 10 2018

    We experienced the biggest one week drop in two years last week for the S&P 500.  The result was the type of moves we haven’t seen in S&P 500 related volatility indexes since August 2015.  We got a 67% gain for VIX last week, with VIX3M gaining 46% and VXMT was 32% higher.  The result was steep backwardation that is normally associated with near term concerns about the direction of the stock market.  There’s lots to talk about on the table below. [...]

  • VIX | Trader Talk | Trade Ideas | Feb 10, 2018, 1:26 PM

    Weekend Review of Russell 2000 Options and Volatility Feb 10 2018

    Weekend Review of Russell 2000 Options and Volatility Feb 10 2018

    Stocks were under pressure last week, which was actually the second week of the biggest two week drop in broad based indexes since August 2011.  Small cap stocks did hold up a bit better than large cap with the Russell 2000 (RUT) giving up 4.49% while the large cap focused Russell 1000 (RUI) lost 5.14%.  Both are in the red for 2018 with RUT down 3.76% and RUI down 2.17%.  The relationship between the Cboe Russell 2000 Volatility Index (RVX) and VIX hit previously uncharted territory[...]

  • VIX | Trader Talk | Trade Ideas | Feb 3, 2018, 11:33 AM

    Weekend Review of Russell 2000 Options and Volatility Feb 3 2018

    Weekend Review of Russell 2000 Options and Volatility Feb 3 2018

    The Russell 2000 (RUT) lost 3.78% last week while the Russell 1000 (RUI) was down 3.82%.  I have a hard time recalling a big weekly drop in the stock market where small caps and large caps lost about the same amount of ground.  For the year RUI maintains a nice lead based on outperformance in January. The RVX premium to VIX took a dive on Friday based mostly on gains in VIX.  The ratio finished the week at just over a 16% premium which is slightly lower than the 2017 low. [...]

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