The two underlying emerging markets that CBOE offers volatility trading products on were mixed last week. The iShares MSCI Emerging Markets (EEM – 39.36) ETF was down almost 1% while the iShares MSCI Brazil Capped (EWZ – 44.61) ETF climbed about 1.5% for the week. Keep in mind emerging markets have been terrible laggards compared to the developed world in 2013. EWZ is still off over 20% on the year and EEM is down just over 12%. Pressure for EEM appeared to have come from China and neighboring countries this past week. Something I found interesting while perusing headlines was one stating that it may be time to get short emerging markets and long developed markets. I did a literal double take worthy of the most dramatic Saturday morning cartoon when I saw that. That idea may be a bit late with EEM down 12% on the year and the S&P 500 up as much, but like every prediction in the financial markets time will tell.
The emerging market related volatility index and futures pricing had me doing some double checking as well. Both VXEEM and VXEWZ were higher on the week. The futures markets were mixed in an odd way that had me running down to the CBOE floor to make sure the quotes were the same on the Bloomberg down there as on my end of day pricing sheet. The quotes and diagrams below are accurate, but unusual. VXEWZ was up, despite the EWZ being up on the week, but that’s where the green comes to an end. All VXEWZ futures were lower on the week and the curve is practically a flat line. VXEEM was higher, expected when EEM was down on the week, but the futures barely followed the 9% move in VXEEM rising only a fraction of that level.