Blogging Options: CBOE Morning Update

Volatility as an asset class

The Chicago Board Options Exchange is disseminating values for a new benchmark index, the CBOE Low Volatility Index (LOVOL).
The CBOE LOVOL Index is designed for investors whose preferences have shifted from investing in riskier assets to lower-volatility assets. The new index aims to provide investors with the ability to replicate an investment strategy that is subject to less downside volatility in a portfolio of S&P 500 stocks, while still preserving the bulk of market gains.
The CBOE LOVOL Index is a blend of two of CBOE’s strategy benchmark indexes – the CBOE S&P 500 BuyWrite Index (BXM) and the CBOE VIX Tail Hedge Index (VXTH). The LOVOL Index bridges the space between the BXM and VXTH strategies:
•The BXM strategy cushions returns against market downturns in exchange for lower returns in more bullish markets.

•The VXTH strategy provides substantial protection against severe downturns in exchange for lower returns in less volatile markets.

The CBOE LOVOL Index measures the performance of a portfolio that overlays SPX and CBOE Volatility Index (VIX) calls over the S&P 500 Index. Specifically, the index is obtained by holding a portfolio of S&P 500 stocks and simultaneously selling SPX calls and buying one-month VIX 30-delta calls on a monthly basis.

CBOE S&P 500 BuyWrite Index (BXM) closed at 901.05.

CBOE VIX Tail Hedge Index (VXTH) closed at 145.12.

CBOE Volatility Index-VIX closed at 15.06, 10-day moving average is 15.98, and 50-day moving average is 16.30.

Calls with increasing volume at CBOE;

EWJ 3/16/2013 10 55K contracts

SPY 12/22/2012 145 24K

AAPL 11/30/2012 590 16K

TIF 2/16/2013 67.5 14K

ORCL 6/22/2013 35 12K


SPDR S&P 500 ETF Trust (SPY) is trading slightly higher in the premarket on the last trading day of the month.

October Personal Income unchanged, Consumer Spending off 0.2%.

ZNGA drifting lower with changes in FB relationship.

GRPN off slightly with management restructuring talks. Retailer FIVE up $2.63 to $34.02 after jump in same-store-sales. 

Several companies announce special dividends before year end.  

VIX starts day at 15.06.