The Week in VIX – 9/28 – 10/2

Despite the S&P 500 rising over 1% last week VIX remained over 20.00 for the 30th straight day although it did drop by over 11%.  This run goes back to the beginning of the heightened levels of volatility that began back on August 21st.  The curve below shows that the curve based on standard monthly VIX futures went from backwardation to kind of crooked (that’s not a technical term).  I say crooked because depending on your definition of backwardation or contango the closing curve on Friday could be considered either.

VIX Curve Table

The short term curve went from backwardation to basically flat which is what I anticipate will be considered normal.  We only have about 10 weeks of short term futures data to work with so I haven’t come to a conclusion on what will be ‘normal’ for VIX Weeklys futures.

VIX ST Curve Table

Finally, a trade example that I found pretty interesting as well as smart from Friday.  Toward the end of the day there was a ratio spread that works as long as VIX is under 35.40 at November settlement.  The specific trade sells 2 VIX Nov 30 Calls at 1.10 each (2.20) and buys 1 VIX Nov 25 Call at 1.80 for a net credit of 0.40.  Both VIX and the November contract were in the 20 to 21 range when the trade was executed so I show where both finished the week last week on the payoff below.


The Week in Volatility Indexes and ETPs – 9/28 – 10/2

Those that casually watch VIX may not be aware of the variety of volatility indexes published by CBOE.  On at least a weekly basis I take a look more than VIX and try to gain a little insight into the mind of the market.  The curve below shows the relationship of four volatility indexes that represent consistent measures of implied volatility as indicated by S&P 500 (SPX) index option prices.  What has been catching my eye since excess market volatility started to commence on August 21st is the relationship between VXV (3-month) and VXMT (6-month).  Note the section of the curve highlighted by the purple box in the chart below and I’ll explain more below.


Since August 21st 3-month volatility has been at a premium to 6-month volatility on the close 25 of 30 trading days.  Going back to early 2008 the shorter dated focused VXV has closed at a premium to VXMT about 13% of trading days with about 2 out of 3 of those closing levels occurring during what we refer to as the Great Financial Crisis in 2008 – 2009.

My interpretation of VXV being at a premium to VXMT was that the market was braced for Fed action at one of the two meetings left in 2015 (most likely December).  VXV measured the nearest time frame just after the last meeting of 2015 and the one many pundits seem to be focused upon.  With the market rally in reaction to the employment number this past Friday VXV dropped below VXMT.  I heard calls that a hike may not occur until 2016 on Friday, but I’m not one for opinions, I like to see what the numbers tell me.  Implied volatility is forward looking measure which can be used to gain insight into Mr. Market’s mind.  If VXV remains under VXMT consistently over the next few trading days I’ll see that as the numbers agreeing with the pundits looking to 2016 for the first rate hike in my children’s lifetimes.


The Weekly Options News Roundup – 10/03/2015

The Weekly News Roundup is your weekly recap of CBOE features, options industry news and VIX and volatility-related articles from print, broadcast and online and social media outlets.

CBOE RMC Europe Recap
CBOE hosted its 4th annual CBOE RMC Europe from Monday through Wednesday this week.  Over 175 industry professionals gathered in Geneva, Switzerland to discuss the latest products and strategies for managing risk, enhancing yields and lowering portfolio volatility.  EQ Derivatives was on the scene and filed several stories:

“Investors Eyeing Mean Reversion Stick with Short VIX Positions” – Daniel O’Leary, EQ Derivatives

“Allocations to Vol Arb, Long Vol Increasing: EFT’s Berset” – Robert McGlinchey, EQ Derivatives

“Tail Risk Fund Fee Structures Come Under Scrutiny” – Robert McGlinchey, EQ Derivatives

“Systematic Strategies Becoming Distorted Amid Changing Market Structure” – Robert McGlinchey, EQ Derivatives

To see our blogs from all of the panels at this year’s CBOE RMC Europe, go to

At the conference, CBOE President and COO Edward Provost announced during his welcome address, the launch of options on three FTSE Russell Indexes, set for October 20th.

For highlights from Edward Provost’s address at RMC, go to

“CBOE Eye Options on Three FTSE Russell Indexes” – Robert McGlinchey, EQ Derivatives

“CBOE Sets October 20 for Russell 1000 Launch” – Cian Burke, Futures & Options World

“CBOE Holdings to Add New Options on FTSE Russell Indexes” – Maria Nikolova, Leap Rate

Weeklys Appetite
There is growing anticipation as we approach the launch of VIX Weeklys options, which will offer greater trading precision for market participants.   These new contracts are set to launch Thursday, October 8th at CBOE.

“VIX Active Funds Support Weeklys, VIX Weekly Option Strategies Eyed” – Robert McGlinchey, EQ Derivatives

The VIX Index retreated slightly this week, but still remained above the closely watched 20 level.  Will October bring a continued ebb in volatility or a spooky surprise?

“After Rough Quarter, Investors Buckle Up” – Mike Cherney and Saumya Vaishampayan, Wall Street Journal

“Goldman: The Options Market Says the S&P 500 Is Poised for a Major Move this Week” – Luke Kawa, Bloomberg

“The Market’s Latest Scapegoat” – Adam Warner, Schaeffer’s Investment Research

“VIX Volume Muted as Benchmark Tests New 20 Normal” – Ryan Sachetta, EQ Derivatives


TYVIX Weekly Review: Treasury Volatility Is On Sale


TYVIX Update HeaderTreasury Volatility Is On Sale  

Market participants perceive a lack of liquidity in the Treasury market and are concerned that more frequent volatility flashes will ensue. Yet Treasury traders appear complacent about short-term Treasury volatility, and are not pricing it high. The price of Treasury volatility is reflected in the spread between expected Treasury volatility (the CBOE TYVIX Index) and realized Treasury volatility. The average value of the spread represents the premium that investors are prepared to pay to avoid volatility.  As shown in Figure 1, this spread is in a low range compared with its value in previous years.

Figure 1. The price of Treasury volatility ty10115Fig1
Weekly CBOE VIX Suite Summary

The week ended amid disappointing manufacturing and weak employment statistics –10-year Treasury yields dipped below 2 percent Friday on news that U.S. nonfarm payrolls gained just 142,000 jobs and August and July monthly data was revised downward. Combined with persistent uncertainty about global growth, weaker data are pushing the expected date of an increase in the federal funds rate target further out. This has depressed TYVIX and sustained VIX. ty10115Fig2 More

I’m Way Out on the Ice

Let me get right down to numbers, since there will be a lot of numbers amongst the words.

In the last post I detailed a bunch of long calls, and an update on those is overdue.  In review:  I had allocated a large (to me) (when it is a risky proposition) amount of money toward seven of the December SVXY calls at the 40 strike, paying about $12.30 each for them (translated to real cost:  $1,230.00 each or $8,610 in total – I’m rounding and ignoring commissions here) when SVXY was about 47.

Just about a week later, I sold them for a modest (but not nearly what I had set out to make) profit and later replaced them with different calls.  Here depicts the disposition of the original calls:

SVXY was in the 50+ range on September 15th, and I got scared out and sold the contracts. This was one of my more painful misses.  Later that day and over the next few days, SVXY ripped up to 62.  I recall being in a very bad mood over these particular days.  At least I got a small profit, but I didn’t open the trade to make just a small profit.  I had loftier goals in mind.  I shouldn’t have done this, but I computed what I would have made (a mentally ill trading behavior) had I held for a few more days, and I don’t want to talk about it.  I’m trying to block it out of my mind.

I will not type here how much I might have made. Believe me, I calculated it and made myself sick.  On the other hand, had I been the one to dump these options this afternoon at $9.90, I would have lost $2.40 per contract, or $1,680, so I’ll be glad for the similar profit I booked instead.  Moving out of the world of “what could have happened” and back into “what actually did happen,” let’s continue.

On the 16th, in the throes of the above-mentioned bad mood, I took the proceeds gleaned from the long option closing and bought 240 shares of SVXY at the price of $56.44 per share.  This looked like an ace move for about one day while SVXY shot up to nearly 63.  After it didn’t look so ace anymore, on the 18th and 21st, I sold 140 of those shares for the average price of 52.77, booking red ink in the amount of $535  (thus the reference to persistent bad moods.)  I didn’t do it because I thought the purchase had been a mistake – in fact, I’m loathe to book any loss and it was like pulling out splinters to do it, but I did it to raise cash for the below:

With $535 loss in hand, I set out to do “long calls, part II.”  On September 21st, with SVXY trading for $53-ish still, I decided to change my risky bet… ahem, I mean, long call strategy just a little this time around. In the previous incarnation, I had kept 800 shares of SVXY and added seven long calls on as a sidecar.  This time I kept 900 shares (remember how I bought 240 shares, bringing my total up to 1,040, and then liquidated 140?  So I had 100 more remaining in the account this time.)  The other changes were:  Fewer calls, a higher strike, a farther-out expiration, and less premium paid (because of the strike being higher and the expiration farther into the future.)

On September 21st I bought six of the SVXY $55 calls (this time a few dollars out-of-the-money instead of in-the-money as previously done) for $8.50 each, expiring January 15th.  The total cost was about $5,100.  At expiration, SVXY will have to rise to at least $63.50 just to get my money back out of these.  By contrast, had I simply held the stock (which I sold for $52.77, so let’s use that as a comparison point)  I could have 96 shares of SVXY instead of the expensive out-of-the-money calls I bought.   I’m comparing 96 shares, not 140, to the long calls, because I did something else (another story for another day) with the rest of the proceeds of the 140 shares, and 96 shares at 52.77 equals $5,066, which is essentially the same total as the purchase price of the abovementioned options.  96 shares would appreciate by $1,030 on the climb from $52.77 to the hoped-for $63.50, and by comparison, SVXY at 63.50 would bring me merely to flat with the calls I saddled myself with now.

Above the expiration day price of about $65.50, I’d start to make more profit by holding the calls vs. the alternate reality world where I might have opted not to do this maneuver and just kept shares instead.  Let’s dream big for a minute and fantasize about SVXY being $80 on January 15th.  (I lie awake at night thinking about these things.)  I would stand to make $2,614 on the 96 shares (which I don’t have anymore) but I could sell the calls on expiration day for about $25 each, which is a total sale price of $15,000, with my cost being $5,100 (remember, I paid $8.50 each), for a profit of $9,900.  This is why I bought calls:  To try to bring in more profit from the sale of the calls than I would on simply holding appreciating shares.

As of this writing (September 29th), those calls have most recently traded for $4.64, which is 45% lower than my purchase price, and the shares most recently traded for 45.68 (after hours), which is 13% lower than the comparison price of $52.77.  Good thing I’m not booking anything today, but the shares never expire, and the options expire in January, so I’m on thin ice. We’ll see if the ice thickens up by mid-winter.

Weekly Stock Market Commentary 10/2/15

Despite a couple of rough days this week, buy signals have emerged from our short-term oversold indicators, and so we have a more bullish outlook for the short term but not necessarily for the intermediate- term.

$SPX has retested the August lows and formed a “W” bottom, so that is support at 1870. A violation of that area would force a retest of the October lows at 1820. A move above 2000 would be bulllish.

Put-call ratios turned bullish just over a week ago, and they remain on buy signals now.

Breadth has been weak, though, and both breadth oscillators remain on sell signals.

In the short term, three indicators have generated buy signals, but their effect is limited to a week or so in bearish markets such as these.

Volatility meatures remain bearish in that $VIX is still in an uptrend. It would have to close significantly lower to negate the uptrend that is in place.

In summary, these simultaneous short-term oversold buy signals should produce a market rally that lasts into next week. However, unless that rally has the power to alter the intermediate-term negative signals, the longer-term picture will remain bearish.


Interest Rate Volatility and TYVIX Discussed at RMC Europe

On Wednesday, September 30, in Geneva, Switzerland at the Fourth Annual CBOE Risk Management Conference (RMC) Europe, two experts – (1) Maneesh Deshpande, Managing Director and Head of Equity Derivatives Strategy, Barclays, and (2) David Rogal, Director and Portfolio Manager, BlackRock– engaged in a discussion of –

  • Focus on Interest Rate Volatility
    • VIX versus TYVIX CBOE/CBOT 10-year U.S. Treasury Note Volatility Index: Similarities and differences
    • Comparing volatility risk premia in rates and equities
    • Cross asset trading between rates and equities using vanilla and hybrid products

TYVIX Index – 10-Year Price Chart

CBOE Futures Exchange offers futures on the CBOE/CBOE 10-Year U.S. Treasury Index (TYVIX). The all-time daily closing high for the TYVIX Index was 14.72 on Nov. 20, 2008. The historical patterns of TYVIX often exhibit upward spikes when 10-year Treasury note and futures prices experience large swings, especially on large downswings. Due to this dynamic, TYVIX futures could provide a hedging mechanism for core instruments of the U.S. fixed income market such as mortgage backed securities, and corporate, municipal and government bonds. 33254

A Sept. 24 story in the New York Times noted —

“The Federal Reserve still intends to raise its benchmark interest rate this year, barring unpleasant surprises, the Fed chairwoman, Janet L. Yellen, said on Thursday. Ms. Yellen, speaking a week after the Fed announced it was not ready to raise interest rates just yet, reiterated that the central bank was not planning to wait much longer. She said that labor market conditions were improving and that the Fed expected inflation to follow. …” More

Bear Market Rallies Are Vicious

The past week, it seemed markets were ready for a nice rip to the upside, on at least a couple of occasions.  That is something actually, as since late August the bulls have been struggling to string some momentum together.  While Monday was a solid win, the sellers came out in earnest the next day with a gap down and close lower that did not give the bulls a chance.  Friday seemed to be all about the upside, given the big rally off the monthly lows the prior day.

A 25 handle gap up in the futures was sold down mercilessly.  The internals were deteriorating all day long, so it was really no surprise when the futures went negative.  Notable was the weakness in Nasdaq and the Russell 2K, part in parcel to the deep losses in biotech.  Though the Dow Industrials were shining all day long thanks to Nike, that stock was only one in a handful to close positive on the day.
99ibb 092515
Bear market rallies tend to be strong and often elusive unless you are willing to guess on the outcome, like Friday.  If you decided to go long Thursday, you guessed right.  But if you stayed long, you most likely gave it all back.  This market is not giving you much chance to take a breath.  That is sign of an unhealthy market environment.


Hedging With VIX Discussion at RMC

The final presentation I attended at this year’s Risk Management Conference discussed Hedging with VIX.  Pravit Chintawongvanich, Head of Risk Strategy at Macro Risk Advisors covered different methods of hedging a portfolio using VIX.

Pravit began listing several questions that should be addressed to determine what will be the ‘best hedge’.   Examples of these questions include what type of sell-off are we concerned about or what is the potential timing of this move.

He compared hedging with either S&P 500 Puts or VIX call options.  He noted, that if the S&P 500 rallies, puts may become so far out of the money which would make them irrelevant as a hedge.  Conversely, VIX has a bit of a floor which means VIX calls may remain ‘in play’ even if the equity market has rallied.  He also noted that depending on the strike prices, S&P 500 puts may be more reactive relative to VIX calls in a market sell-off and are a more direct hedge than VIX calls.

A comparison of VIX futures versus VIX calls was offered up as well.  Pravit noted that VIX options are priced off VIX futures and the roll down of VIX futures pricing results in the underlying moving away from the call strike price.   He noted that VIX futures already have an option like payoff so buying VIX calls is like buying calls on calls.  One time when VIX calls will outperform is when we get a big spike in volatility.  With respect to monetizing a VIX hedge Pravit noted that VIX calls can deteriorate very quickly after an initial VIX spike.

A final comparison involved looking at VIX calls spreads versus looking at buying VIX calls.  Pravit noted that in order to realize the full value of a call spread you need to hold it to expiration.  The short option in the call spread is a drag in performance and monetizing the spread would result in a fraction of the maximum potential return.  However, if you plan on holding the trade through expiration the call spread may be a better trade.

Extracting Useful Information from Listed Option Prices

I often say that attending CBOE’s Risk Management Conferences is the highlight of being employed by CBOE.  Getting a chance to see Stacey Gilbert, the Head of Derivatives Strategy at Susquehanna, speak in person for the first time is a highlight of this year’s European conference.  Her topic, “Extracting Useful Information from Listed Option Prices” is an area I focus on in both my academic and professional lives so I was really looking forward Gilbert’s presentation.

There are three things any trader (option or non-option) can determine from the option market is the estimate of three things –

  • Implied Event Moves
  • Implied Probability Distribution
  • Implied Dividends and Stock Borrow Rates

Gilbert offered a contrast of the difference between information gained from a stock price and the option market.  A stock price represents a real-time fair market value of a stock. The option market may be used to determine a real-time “fair distribution” of the underlying market on future dates.

She then moved on to my favorite topic, earnings.  Using Micron as an example she noted the average historical move and compared it to a current at the money straddle using options expiring the Friday after earnings.

Gilbert also noted how option prices can be used to estimate the market’s expectation of future dividends.  She noted using at the money combos to extrapolate future dividends and that the option market will often adjust in anticipation of a change in dividends.  She also discussed using the combo to determine the cost of borrowing a stock that is hard to borrow or what that cost should be.

Presentations in Geneva on Managing Tail Risks

Seven years ago several major stock indexes and commodity indexes suffered drawdowns of more than 50%, and since then there has been increased investor interest in managing tail risks.

On Wednesday, September 30, in Geneva, Switzerland at the Fourth Annual CBOE Risk Management Conference (RMC) Europe, two experts – (1) Julien Halfon, Principal – Financial Strategy Group, Mercer, and (2) Jean-Francois Bacmann, Portfolio Manager and Head of Volatility Strategies, Man AHL—delivered presentations on –

  • Managing Tail Risks
    • Who should hedge tail risks and is now the time?
    • Understanding equity risk management needs for different institutional investors
    • Past performance of various alternatives: de-risking, diversifying and hedging
    • Case studies on the design and implementation of active and systematic approaches

Julien Halfon explored the pros and cons of using a number of strategies and tools, including low-volatility equities, convertible bonds, corporate bonds, Treasury bonds, structured equities, and tail risk funds, to manage tail risk.

Jean-Francois Bacmann noted that there is a large variety of tail events, hedge funds and tail events are affected by tail events, volatility offers the best hedging ability, one can look at VXV Index for 3-month implied volatility, one can look at active versus passive solutions for tail risk challenges. Mr. Bacmann noted that there has been good liquidity and transparency (but less convexity when compared to variance products) for index options, VIX futures, and VIX options.


The line chart below shows the changes since March 2006 for “traditional” benchmark indexes versus two indexes that use VIX options or futures –

The CBOE VIX Tail Hedge Index (VXTH) buys and holds S&P 500 stocks, and also often buys 30-delta call options on the VIX Index. In the chart below the VXTH had a 100% rise, a higher rise than the other four indexes in the chart, and the VXTH Index had relatively low volatility. In August 2015 the VXTH Index rose 0.8% and the S&P 500 Index (TR) fell 6%.

The S&P 500 VIX Mid-term Futures Index offers exposure to a daily rolling long position in the fourth, fifth, sixth and seventh month VIX futures contracts, and reflects the implied volatility of the S&P 500 at various points along the volatility forward curve. In the chart below the S&P 500 VIX Mid-term Futures Index rose about 200% during the financial crisis seven years ago, but it has fallen precipitously since 2009 because of contango and a drop in the VIX® Index. In August 2015 the S&P 500 VIX Mid-term Futures Index rose 27.3% and the S&P 500 Index (TR) fell 6%.

Matt 1



Below are two histograms that cover monthly returns for these indexes –

The CBOE S&P 500 Zero-Cost Put Spread Collar Index (CLLZ) is designed to track the performance of a low volatility strategy that 1) holds a long position indexed to the S&P 500 Index; 2) on a monthly basis buys a 2.5% – 5% S&P 500 Index (SPX) put option spread; and 3) sells a monthly out-of-the-money (OTM) SPX call option to fully cover the cost of the put spread. In the CLLZ histogram chart below the total number of months in which there were declines of worse that 6% were — 13 months for the CLLZ Index and 24 months for the S&P 500 index.

Matt 2

The CBOE S&P 500 30-Delta BuyWrite Index (BXMD) is designed to track the performance of a yield-enhancement strategy that holds a long position indexed to the S&P 500 Index and sells a monthly out-of-the-money (OTM) S&P 500 Index (SPX) call option. The call option written is the strike nearest to the 30 Delta at 10:00 a.m. CT on the Roll Date.  The BXMD Index rolls on a monthly basis, typically every third Friday of the month. In the BXMD histogram chart below the total number of months in which there were declines of worse that 6% were — 19 months for the BXMD Index and 24 months for the S&P 500 index. The BXMD had more big-move months (both up and down) than the CLLZ Index.

Matt 3

Cross-Region and Cross-Asset Volatility Analysis for Investing and Hedging

During the second session on Day 3 at CBOE’s Risk Management Hitendra Varsani, Head of Quantitative and Derivative Strategies from Morgan Stanley teamed up with John Moffatt, Portfolio Manager of the World Index Book from Capstone to discuss Cross-Region and Cross-Asset Volatility Analysis for Investing and Hedging.

Varsani began the session discussing the history of options noting the first option trading we know of involved the philosopher Thales in ancient Greece.  He cornered the olive press market through purchasing options for their use in anticipation of a bountiful harvest.  He then fast forwarded to 1973 with the creation of CBOE also mentioning milestones such as the creation of VIX derivatives.

After discussing the history of options Varsani moved on to talking about volatility risk premia in different markets such as equities, commodities, foreign exchange, and bonds.  He touched on unique characteristics of each market such as equities offering the most alternatives and that fixed income markets have a consistent flow of hedging demand from different market participants.

In the second section of Varsani’s presentation he notes the spillover effects of volatility events in different market sectors.   He noted that paying attention to a broad range of asset classes can help forecast potential volatility in different sectors.  For example there was an increase in volatility in different markets in late July and early August of 2015 that may have served as a warning for the equity market sell off in late August.

John Moffatt then took the stage to discuss how supply and demand imbalances impact equity index volatility surfaces globally.  He notes the imbalances have been around for years, he just notes they have recently become more pronounced.  He addressed skew and noted there are many different methods of measuring skew, but all measures tend to show very similar patterns.  His preference is to combine different measures of skew when analyzing the markets.

He notes that trading skew is a dynamic process and often a skew trade may turn into a vega trade if the market moves.  The S&P 500 has historically had the highest skew while most Asian skew curves are flatter than the US curve.  He cites the popularity of auto callable products in Asia contributing to the flatter skew in that region.  Turning back to the US he noted that skew has been trending higher for over 10 years.  He attributes the increase in skew to some regulatory changes in the US that may have inadvertently resulted in less supply of downside puts.  Rounding out a look at global skew, Moffatt noted that skew has been flattening in Europe which may be influenced by increased use of structured products and bullish sentiment toward Europe in the equity markets.

Financial Historian Edward Chancellor Address at RMC

As a big fan of the history of the financial markets I was excited to see Edward Chancellor as the first speaker on the last day of this year’s Risk Management Conference.  His talk was titled The Consequences of Extraordinary Monetary Policy:  An Historical Perspective on the Current Environment.   When Paul Stephens introduced Chancellor he said he felt it would be useful to have a financial historian speak at RMC.  I agreed when he said that and believe it even more after listening to the talk.

When discussing monetary policy he notes that low rates result in a search for yield.  As an example cites the Tulip Bulb Mania as actually being a function of a search for yield.  The point is that speculative bubbles never occur in periods of tight interest rates.  When interest rates are low there is a lot of liquidity and money flows to speculative investments.  Stated another way credit booms tend to feed on themselves and when credit stops flowing the result can be a catastrophe.  He also showed a graphic that depicted different types of bubbles and noted that they tend to cluster and this clustering tends to happen around periods of easy monetary policy.

Central bankers do not make the association between easy credit and bubbles.  Their view of bubbles is that they cannot be recognized ahead of time.  He gives several examples of markets that appear very expensive or nonsensical in the current market environment and potentially developing bubbles.

An interesting chart in this presentation was the percent of high yield as a share of US Corporate Bond issuance is near an all-time high.  This is usually a precursor to the deterioration of credit.  He also noted that the median house price divided by median family income has retraced about half to the peak in 2006.  He noted when comparing new home prices to median income we are actually at a higher level than 2006.   He finished up by showing that US household net worth is at record levels when considered a percent of GDP (higher than 2006).  He considers this paper wealth and it should deflate at some point in the future.

Current credit conditions have been supporting emerging markets, but this appears to have already turned lower.  He specifically noted that China has experienced a huge boom in credit.  He notes the collateral on credit in China is suspect as well.  He noted that China is not the only emerging market experiencing a credit boom as emerging market credit issuance as a percent of world GDP is at record levels.

He finished up noting that low interest rates distort capitalist systems.  He turned his attention to Japan and discusses deflation.  He states that deflation is not the end of the world and noted that Apple lowers prices on products systematically but that doesn’t keep us from buying Apple products.  With respect to Japan he points out that low interest rates created a system where weak companies could continue to survive.  These companies may not have survived in an environment of higher rates.  He finished this final section noting that low interest rates beget low interest rates.  He turned to the US and stated that record profits don’t seem to make sense to him at this time.

More Precision with SPX and VIX Weeklys – Discussion at RMC Europe

During the first three decades of listed options trading (1973 – 2003) most exchange-listed options in the US (except FLEX options) had expirations on or near the third Friday of the month.

In the past decade S&P 500® Weekly options (SPXW) offered near-term expirations on Fridays other than the third Friday standard expirations. In 2015 new Weekly futures and options on the CBOE Volatility Index® (VIX®) are being introduced.

On Tuesday, September 29, at the Fourth Annual CBOE Risk Management Conference (RMC) Europe, two experts — (1) Spencer Cross, Head Index Volatility Trading, Deutsche Bank Securities Inc., and (2) Dominic Salvino, VIX Specialist, Group One, LLC, — engaged in a discussion of –

Weeklys – Options and Futures that Expire on a Weekly Basis
o   Dynamics of how Weeklys differ from regular products
o   Special characteristics of VIX Weeklys
o   Utility of Weeklys for just-in-time hedging or roll-down trades