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 Cboe S&P 500 Implied Correlation Index
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Cboe S&P 500 Implied Correlation Index
  • Overview
  • Performance
     

The Cboe S&P 500® Implied Correlation Indexes

The Cboe S&P 500 Implied Correlation Indexes are the first widely disseminated, market-based estimate of the average correlation of the stocks that comprise the S&P 500® Index (SPX).

Using SPX options prices, together with the prices of options on the 50 largest stocks in the S&P 500 Index, the Cboe S&P 500 Implied Correlation Indexes offers insight into the relative cost of SPX options compared to the price of options on individual stocks that comprise the S&P 500.

  • Cboe began disseminating daily values for the Cboe S&P 500 Implied Correlation Indexes in July 2009, with historical values back to 2007.
  • Cboe calculates and disseminates two indexes tied to two different maturities, usually one year and two years out. The index values are published every 15 seconds throughout the trading day.
  • Both are measures of the expected average correlation of price returns of S&P 500 Index components, implied through SPX option prices and prices of single-stock options on the 50 largest components of the SPX.

Ticker symbols KCJ, ICJ, and JCJ are "rotated" as time elapses. For example, as of December 2016:

  • KCJSM
    • Jan 2018 maturity S&P 500 implied correlation
    • Calculated using Jan 2018 equity options and Dec 2017 SPX options
    • Quotation is suspended after the Nov 2017 SPX expiration
  • ICJSM
    • Jan 2019 maturity S&P 500 implied correlation
    • Calculated using Jan 2019 equity options and Dec 2018 SPX options
    • Quotation is suspended after the Nov 2018 SPX expiration
  • JCJSM
    • Not quoted until after the Nov 2017 SPX expiration
    • Jan 2020 maturity S&P 500 implied correlation

The Cboe S&P 500 Implied Correlation Indexes may be used to provide trading signals for a strategy known as volatility dispersion (or correlation) trading. For example, a long volatility dispersion trade is characterized by selling at-the-money index option straddles and purchasing at-the-money straddles in options on index components. One interpretation of this strategy is that when implied correlation is high, index option premiums are rich relative to single-stock options. Therefore, it may be profitable to sell the rich index options and buy the relatively inexpensive equity options.

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The performance quoted represents past performance and does not guarantee future results.