This Week in VIX Options and ETNs – 10/11/2013

The difference from Friday to Friday does not do justice to the week we just experienced in the world of volatility trading.   A prime example was the action in VVIX.  VVIX managed to top 120.00 during the day on Wednesday.  This is a price level not seen for the VIX of VIX since August 2011.  There are numerous instances that depict exactly what was experienced in the pits on the floor of the CBOE this past week.  I am using this past week as an opportunity to highlight the relationship between the CBOE Short-term Volatility Index (VXST – 16.80), CBOE Volatility Index (VIX – 15.72), and CBOE 3-Month Volatility Index (VXV – 16.57).  The chart below shows the 9 – 30 – 93 day levels of volatility based on SPX option trading for each of the last six days.

VXST - VIX - VXV Curve

Looking at last Friday versus this Friday doesn’t say much.  But when you see all six closing curves for the past week it says the same thing that a VIX trader muttered to me this morning before the open, “Man this has been a hell of a week.”  The three top curves are the mid-week action and on the bottom, last Friday, this Thursday, and this Friday are represented.

VIX option trading set a record volume day this past week surpassing the old record by almost 400,000 contracts.  400,000 is the total volume on some light days, so that really is a significant beat on volume.  In the ETN space VXX had a couple of good days and then fell off as VIX and VIX futures took it on the chin late in the week.  Basically the volatility market went from ‘what me worry?’ to ‘worry!’ to ‘what me worry?’ again.  Alfred E. Neuman would be proud.

Finally, there were some great pieces in this space last week regarding VIX this past week that are worth a look –

Bill Luby showed the outcomes of a couple of recent government induced panics – http://www.cboeoptionshub.com/2013/10/09/history-vix-recent-debt-ceiling-sequestration-battles/

Henry Schwarz from Trade Alert, LLC joined our team and discussed in depth market activity mid-week –                                                                    http://www.cboeoptionshub.com/2013/10/10/volatility-rules/

Marty Kearney covered record VIX volume on Tuesday – http://www.cboeoptionshub.com/2013/10/08/vix-crazy-record-day-options-futures/

Finally, I discussed the VXST – VIX – VXV and VIX Futures curves on Monday as things were heating up –                                                                             http://www.cboeoptionshub.com/2013/10/07/tale-two-volatility-curves/

VIX Options ETNs

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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…

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