This Week in VIX – 6/6/2014

All market observers not on vacation are now aware that VIX closed on Friday at the lowest level since the financial crisis as the S&P 500 made new highs.   There will be market watchers that will say the very low VIX like this is a sign that the bull run is near an end, but odds are most of these market watchers have been making bearish comments since the S&P 500 was 20% lower. I’ve also heard the 2007 comparisons that say this is how the market was acting just before the crisis kicked off in 2008.

VIX PA

VIX futures prices played catch up to the downside last week as time to expiration and a high VIX continues to elude VIX bulls (which are also by default SPX bears).  Both June and July VIX futures lost close to 10% last week while the index was down around 6%.

VIX

Despite VIX coasting along under 11.00 Friday afternoon the last sizable VIX option trade of the week focused on July VIX Put and is based on VIX being over 12.10 at July expiration. That is if the trade is held that long. Someone came in just seconds before the Friday close and sold 20,500 of the VIX Jul 12 Puts for 0.10.   It’ll take a little (but not much) volatility for that trade to work out.

 

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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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