Since the banking crisis in Cyprus began in mid-March, investors have asked – How nervous are the markets in Europe and worldwide? and – How can I manage my worldwide portfolio exposure?
Investors now have more tools to track and manage worldwide volatility and portfolio exposure. CBOE offers 20 indexes designed to provide real-time measures of implied volatility (www.cboe.com/volatility), and a number of exchanges across the globe now are authorized offer licensed volatility indexes that utilize the popular VIX methodology.
There is evidence to suggest that since mid-March implied volatility rose more in Europe than in other major financial markets. In the period from March 15 through today (March 26) the VSTOXX – EuroSTOXX 50 Volatility Index (VSTOXX) rose 32.7%, the CAC-40 Volatility Index (VCAC) rose 27.8%, the CBOE EuroCurrency Volatility Index (EVZ) rose 17.0%, while the CBOE Volatility Index (VIX) rose only 13.0%. See the chart and table below for more related info.
SELECT CBOE OPTIONS – TOTAL VOLUME IN FEBRUARY 2013
CBOE now offers dozens of options for investors who wish to manage their global equity exposure. Below is a list of the CBOE options volume in February for select CBOE options.
Puts Calls Ticker Security
9,764,582 5,424,712 SPX S&P 500 Index
3,622,874 6,883,829 VIX CBOE Volatility Index
241,636 233,122 EEM iShares MSCI Emerging Markets Index
77,806 48,196 EFA iShares MSCI EAFE Index Fund
65,181 31,933 EWZ iShares MSCI Brazil Index Fund
7,438 4,026 EWI iShares MSCI Italy Index Fund
6,554 5,780 EWP iShares MSCI Spain Index Fund
4,459 807 EWG iShares MSCI Germany Index Fund
1,342 149 EWQ iShares MSCI France Index Fund
324 242 VGK Vanguard MSCI European ETF
260 110 EWL iShares MSCI Switzerland Index Fund
A microwebsite with more information and more options is at www.cboe.com/global.
Strategies that could be considered to manage worldwide portfolios include —
- Buying Index Puts To Hedge the value of a portfolio.
- Buying Index Calls in anticipation of market advances.
- Buying Index Puts in anticipation of a market correction.
- Buying Index Straddles in anticipation of a major market move.
- Protective Index Collars with minimum net premium costs.