This Week in Emerging Market Volatility – 7/11/2014

The Brazilian market proved that the country can get over an embarrassing loss. In fact now that everyone can focus on work again and there is no chance of a month long victory celebration the iShares MSCI Brazil Capped ETF (EWZ – 48.80) gained about 1% last week. However, despite a strong performance in EWZ implied volatility dropped slightly on the week.


Despite the Brazilian market being somewhat resilient, the iShares MSCI Emerging Markets (EEM – 43.89) ETF was down about a half a percent last week. That slight weakness in EEM resulted in almost a 5% gain in VXEEM which rose from 13.71 to 14.37.


Looking at the curves, both front month futures were down despite a rise in VXEEM and a small drop in VXEWZ. There are just two more trading days left until settlement so the chance of a volatility event that will push the respective indexes higher before expiration has diminished greatly and the drop in July futures was the result.


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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…