Interleague Baseball and CBOE Equity VIX on AAPL

On this day in 1997 the first inter-league major league baseball game was played between the San Francisco Giants and the Texas Rangers.  To some baseball purists (I’ve always wondered if you can put that on a resume) this was the end of life as we know it.  Of course some of the same believers in baseball tradition felt the same way in 1973 when heaven forbid Rule 6.10 introduced the designated hitter rule.  In both cases if there were a VXMLB (VIX of Major League Baseball) it probably would have been quoted at historical highs before these two ‘events’ and then settled back down to historically normal levels after these life changing (for some) events had passed.

Apple (AAPL – 435.18) is a stock that actually does have a volatility index quoted on it.  VXAPL is the CBOE Equity VIX on Apple.  On Monday of this week AAPL opened up their Worldwide Developers Conference (WWDC) with much excitement among Apple purists.  However, the trading community was prepared for much ado about nothing.  Keep in mind, for a long time AAPL sneezed and traders bought puts, so the trading community not getting excited about an AAPL meeting is sort of newsworthy.   How do I know that traders didn’t care about this meeting?  VXAPL told me.  The chart below clears this up a bit.

VXAPL 1/2/2013 – 6/7/2013

VXAPL 2013

The range in 2013 for VXAPL has been between 26 and 45 with an average of just over 32 leading up to the WWDC on Monday.  Those two spikes on this VXAPL chart are the two earnings releases that have occurred this year.  In the past, every meeting was met with some anticipation in the markets, but as there appears to be nothing financially earth shaking (like the AAPL version of introducing the DH) at these meetings VXAPL has not run up with any sort of anticipation of a big move in AAPL based on the meeting.

So, was VXAPL right?  I would say so as the stock was down less than 3 points on Monday even with all the hoopla at WWDC.  This translates into a drop of 0.66% which is about a third of the average daily move in AAPL stock this year.  VXAPL forecasted low volatility and that’s what the market got.  For baseball, in the case of inter league play and the designated hitter rules the purists declared the death of the game as we knew it.  The jury is still out on that one and probably will be for some time.

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Russell Rhoads, CFA

CBOE Options Institute

Russell Rhoads, CFA, is a Senior Instructor with the Options Institute at the Chicago Board Options Exchange. He joined the Institute in 2008 after a career as an investment analyst and trader with a variety of firms including Highland Capital Management, Caldwell & Orkin Investment Counsel, TradeLink Securities and…