VIX-related Benchmark Indexes

VIX-related Benchmark Indexes

Delayed Quotes
Sym Last Pt. Change
VPD 356.35 0.00
VPN 329.01 0.00
VXTH 239.77 1.33
LOVOL 219.42 0.00
VSTG 165.41 0.00

Descriptions of VIX-related Benchmark Indexes

  • Cboe Low Volatility Index (LOVOL) is a 40% / 60% blend of the CBOE S&P 500 BuyWrite Index (BXM) and CBOE VIX Tail Hedge Index (VXTH); the portfolio overlays long VIX calls and short S&P 500 calls over an investment in S&P 500 stocks.
  • Cboe VIX Premium Strategy Index (VPD) overlays a sequence of short one-month VIX futures on a money market account; the short VIX futures positions are held until expiration and new VIX futures are then sold.
  • Cboe Capped VIX Premium Strategy Index (VPN) tracks the performance of a strategy that systematically sells 1-month VIX futures, capped by the purchase of a VIX call option; the short VIX futures position is capped with long VIX calls struck about 25 points higher than the VIX futures price.
  • Cboe VIX Tail Hedge Index (VXTH) buys and holds S&P 500 stocks, and also often buys 30-delta call options on the CBOE Volatility Index® (VIX®).
  • Cboe VIX Strangle Index (VSTG) is a premium capture index that overlays short VIX call and put options with a capped long VIX call option position. The position is collateralized by fixing the number of strangles such that 80% of capital is reserved.

Standard Deviations for Indexes

The LOVOL and VXTH indexes had lower standard deviations over a 10-year period.

Paper on Hedging and Tail Risk Management

Key Tools for Hedging and Tail Risk Management is a paper by Asset Consulting Group (February 2012)

Key highlights from the paper include:

  • Tail Risk Over 25 Years: Since mid-1986 the worst monthly declines for select indexes include: down 28.2% for the S&P GSCI Index, down 21.5% for S&P 500, down 20.2% for MSCI EAFE, and a decline of only 8.6% for the CLL Index (Exhibit B).
  • Risk and Diversification in 2008: Changes for indexes in 2008 - S&P 500® down 37.0%; two indexes with options and stocks - CLL Index down 23.6% and VXTH Index down 19.3 (Exhibit A).
  • Lower Volatility: The CLL has incurred about 70% of the volatility of the S&P 500 over the last 26 years. Select portfolios with the VXTH had less volatility than the S&P 500 over the last 70 months (Exhibits C, F, and O).

Updated Price Charts


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