Cboe Blogs

As the seasonally strong March period is now in full gear for stocks, I cannot help but wonder whether the highly volatile period of February will continue.  That is a big question, and has many on the sidelines wondering if the roller coaster ride may begin again.  As we watch the action day by day, we have seen some very choppy price movement, which is typical after such a volatile run. The market is trying to discover price, and with such dramatic movements and wide ranges it takes[...]

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[...]

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[...]

Stacey Gilbert from Susquehanna and Ilya Feygin from WallachBeth Capital teamed up to talk about Behavioral Finance at Cboe RMC today in Bonita Springs, FL.  Stacey started out with an experiment discussing certain and probable wins and losses.  The point was to show that the expected rationality of decisions breaks down in certain situations.  She then mentions Prospect Theory which is basically the study of how people made decisions.  Specifically, she talked about loss aversion. [...]

Louis-Vincent Gave from Gavekal in Hong Kong delivered a speech called Market Movers:  The Structure and the Cycle in 2018.  He starts out saying he’s often been depicted as a China perma-bull.  He notes that when considering an investment, you need to look into people’s incentives.  In China the recent party congress dictated that the focus is shifting from economic growth to being more aware of healthcare, housing, and the environmental impact of decisions. [...]

Paul Stephens from Cboe conducted a fireside chat with Cameron and Tyler Winklevoss covering their insights into Bitcoin and Bitcoin XBT futures that were listed at the Cboe Futures Exchange in December 2017.   They started out discussing Bitcoin and blockchain technology.  They often refer to Bitcoin as Gold 2.0 and noted that the CFTC has declared bitcoin as a commodity.  Some background was given with respect to the creation of the Gemini Trust, it was noted that it took[...]

Day two of Cboe RMC U.S. 2018 kicked off with Ed Tilly, Chairman and Chief Executive Officer of Cboe Global Markets, welcoming approximately 300 attendees to this year’s event, the 34th annual Cboe Risk Management Conference. Given the recent return of volatility to the marketplace, Tilly focused his remarks on volatility, Cboe’s VIX Index and risk management.  February 5 was an extreme day in the market.  The Dow and VIX Index experienced record single-day moves.  Exchange[...]

Bill Speth from Cboe Global Markets teamed up with Mandy Xu, Chief Equity Derivatives Strategist Credit Suisse, for a session titled Interpreting Volatility-Related Indicators, and Determining Courses of Action.    Bill started out noting that the recent market activity has shown that many people understand volatility, but just as many do not understand volatility.  Cboe is taking on the task of raising the bar to try to educate more market participants on volatility and VIX. [...]

A newly released report found that the number of SEC regulated funds using options rose from 10 in 2000 to 157 in 2017, and that the aggregate amount of assets in the options-based funds has risen to more than $54 billion. The new study, “Performance Analysis of Option-Based Equity Mutual Funds, CEFs and ETFs: An Update” is now available at www.cboe.com/funds  The new white paper updates the original findings of 2014 study of SEC-registered option-based funds, which focus on broad-based[...]

This year we received new questions regarding the performance and downside risk of cash-secured put-writing strategies, and WisdomTree launched an ETF designed to track the Cboe Russell 2000 PutWrite Index (PUTR). In particular, questions have been raised as to what types of returns and drawdowns have been experienced by cash-secured putwrites over the past decade and in February 2018. HIGHER RETURNS SINCE 2001 AND IN FEBRUARY 2018 The line chart below shows that the PUTR had higher returns than[...]

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[...]

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[...]

Over the years we have heard great interest from many investors in the ability to use SPX and VIX products around-the-clock to help manage their portfolios. The interest has been particularly strong from investors from outside the U.S. time zones. The trading hours for some key Cboe products (SPX options, VIX options, VIX futures, and XBT futures) now include both Regular Trading Hours (from 8:30 a.m. to 3:15 p.m. CT), and Global Trading Hours (GTH) as shown in the table below the three volume charts.[...]

The equity markets continue to respond to higher rates on the long end of the curve, but thankfully the Fed sees the entire curve is shifting upward.  This would be considered a positive, as opposed to an inverted curve.  So, with rates at levels not seen in a couple of years, but for a good reason (a bit of inflation finally coming into the system) why is everyone freaking out?  The obsession with higher rates is just mind-boggling, but perhaps we can answer some questions about it[...]

A major rally this week off the lows of a 10% stock market correction were in order this past week.  It certainly had many dizzy from the rollercoaster ride that we have all been on, something very different than what we saw previously.  The enormous move in volatility came at such a breakneck speed that if you blinked, you may have missed it. But let's understand the move on volatility from a latent 10-12% to about 30-50% in days is just not normal.  We talked last week about the[...]