This morning while conducting a webcast about VIX and extended hours trading I was asked a good question. This means I didn't know the answer.
Tomorrow at 7:30 Chicago time the first iteration of the 2015 First Quarter GDP number will be reported. This will be the first time this number has been released since CBOE began offering extended hours trading for VIX and SPX index options. While talking about this I was asked, “What does VIX usually do in reaction to the Advanced GDP release?” My answer, “I don’t know, but I’ll find out”. The table below is me finding out.
I took a look at the directional price change for VIX and SPX, along with the magnitude of price changes for those two indexes on the day that GDP is released. I looked back to the first quarter 2008 number through the fourth quarter of 2014 which comes to reports. It turns out the S&P 500 has moved up 13 times and moved lower 15 times in reaction to that numbers. Not surprisingly, VIX has moved up 15 times and lower 13 times or opposite of the S&P 500 move. Basically the reaction to the number has been about 50/50 higher or lower.
The Abs Avg column is the average move (higher or lower) in reaction to GDP. On average the S&P 500 moves 0.98% which is just a little bit higher than the average every day price move of 0.91%. VIX actually has a little more relative action having moved on average 5.79% compared to 5.11% on average for all trading days over the same period.
Tomorrow morning I’ll be keeping an eye on VIX option and SPX option markets for interesting trades in front of or in reaction to the GDP report. I plan on reporting back in this space if anything interesting catches my eye.