Ten years ago at CBOE, on March 25, 2004, on the eve of the launch of futures on the CBOE Volatility Index® (VIX®), presentations on Volatility and Enhanced Returns were delivered by a 4-person panel comprised of Joanne Hill, Izzy Nelken, Gary Lahey, and Jon Najarian. There was quite a bit of excitement in the room as the presentations were delivered, as in previous years investors had requested a tradable version of the well-known and powerful VIX Index, but there also was uncertainty as to how the new VIX futures might be priced and hedged. At the time some experts had suggested that the potential for success was greater for variance futures than for VIX futures.
VIX FUTURES VOLUME
Over the past decade the total trading volume for VIX futures has surpassed 95 million contracts, and the VIX futures average daily volume rose from 4,543 in 2009 to more than 207,000 so far in 2014.
Tomorrow at CBOE (at 5 PM on March 26) a panel discussion at CBOE featuring four experts will survey the development and promise of volatility products. The four panelists will be:
- Mike Edleson, Ph.D., CFA, Chief Risk Officer, Office of Investments, University of Chicago,
- Joanne Hill, Ph.D., Head of Investment Strategy, ProShare Advisors,
- Jamie Tyrell, VIX Options Market-maker, Group One Trading,
- Krag “Buzz” Gregory, Ph.D., Managing Director, Goldman Sachs.
Topics to be addressed include:
- The tenth anniversary of the launch of VIX index futures on March 26, 2004,
- The launch of new volatility indexes and products,
- Discussion of VIX contract performance in periods of market turbulence,
- Discussion of contract design, pricing, and contango issues,
- Applications, including managing portfolio tail risk and enhancing risk-adjusted returns.
Admission is $15 in advance (or $20 at the door) with light food and drinks provided. The doors will open at 5:00 pm. The panel discussion will commence at 5:30 pm and conclude by 7:00 pm. Purchase tickets or reserve a seat (if space is still available) via TicketLeap: http://bit.ly/VIXatCBOE
The meeting is hosted by Chicago QWAFAFEW.
CORRELATIONS AND DIVERSIFICATION
Joanne Hill will present a number of charts, including the one below that shows that the correlation of VIX and the S&P 500 is even more negative in times of falling equity markets. I will ask the panelists how VIX products can be used to help diversify investors’ portfolios.