This Week in VIX – 5/2/2014

VIX traded off to a level where it has recently spent a few days before a stock market pull back results in a quick move back to the mid-teens. This has been the pattern for some time and when VIX reaches a point that it has a 12 handle, stock market bears and volatility market bulls (which are the same thing) start to pay close attention in hopes of catching a move to the upside.


I spent Saturday in Washington, DC at a TD Ameritrade event where I got to speak to several traders who focus on VIX as a market indicator. A common theme that came up was the May VIX future at 14.90 when VIX closed the week at 12.91. The two point difference between May VIX and VIX results in pretty steep contango as displayed in the chart below.   Something else that stood out last week with respect to VIX was the amount of block trades I September and October call options on VIX. It is a bit early to get exposure to options expiring in late summer to early fall. That is unless you think sustained higher volatility levels are on the horizon.


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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…