On Friday, May 9, options on the CBOE Russell 2000 Volatility IndexSM (RVXSM) experienced total contract volume of 4,653 contracts, establishing a new all-time high for single-day volume for the RVX options.
BREAKDOWN OF FRIDAY’S RVX OPTIONS VOLUME
On May 9 the RVX options volume consisted of 3,833 RVX calls and 820 RVX puts, and the RVX Index closed at 19.53. The average daily closing value of the RVX Index was 26.2 in the period from January 2004 through April 2014. In past years volatility indexes often have been mean-reverting. Note in the table that the RVX strike prices that had the biggest volumes on Friday were the RVX 26 calls and RVX 27 calls.
RECENT NEWS STORIES
Why is there increased interest in RVX? In 2013 the Russell 2000® Total Return Index rose a strong 38.8%, but since hitting its all-time high on March 4, 2014, the index has dropped 9 percent. Here are some recent news stories have highlighted increased concerns about small-cap stocks and related volatility –
- “Russell 2000 Volatility Hits Seven-Share High” (Bloomberg BusinessWeek)
- “Will Diving Small-cap Stocks Sink Market?” (USA Today), and
- “Small-caps’ Slide Reflects a Market in Trouble” (Marketwatch.com).
BACKGROUND ON THE RVX INDEX
The CBOE Russell 2000 Volatility IndexSM (RVXSM) is a key measure of market expectations of near-term volatility conveyed by Russell 2000® stock index option prices. It measures the market’s expectation of 30-day volatility implicit in the prices of near-term Russell 2000 options. The RVX can serve as a valuable gauge for investors who trade RUT options.
Here are some key features of the RVX that could add to the appeal of RVX options and futures –
BIG MOVE IN 2008. While many stock indexes and commodity indexes experienced big drawdowns in 2008, the RVX Index rose 67% in 2008.
NEGATIVE CORRELATION. The daily price moves for the RVX and RUT indexes have a correlation of negative 0.74 in the period from January 2004 through April 2014.
BIG UPSIDE DAILY MOVES. Since January 2005, the RVX Index has had 17 days in which it has jumped more than 20%.
To learn more about the RVX index and how it can help manage small-cap exposure, please visit www.cboe.com/RVX.