Volatility Trading Today – 7/17/2014

The cool weather has been making it feel like summer is ending and the markets acted like it as well. History tells us that September and October are treacherous months for the stock market and like the cool weather we got a swoon in the S&P 500 today. The result was fairly decent moves in VXST, VIX, and VXEEM when compared to historical spikes. The table below covers all the tradable volatility indexes, their performance today, where the percent change ranks relative to history, and what the record moves have been for each index.

VIX Table

Upon first glance the difference between RVX and VIX stands out. I’ve noticed in the past when we have events that result in macro concerns VIX tends to rise more than either VXN or RVX. We definitely witnessed that today. The tame moves in GVZ and OVX were a bit surprising as well, the Russia – Ukraine situation has influenced oil in the past so I kind of was perplexed by those to volatility indexes not putting up a bigger gain. Finally, the difference between VXEEM and VXEWZ stands out as well, but VXEWZ has been at a significant premium relative to all the other equity market volatility indexes in 2014, despite the Brazilian market being fairly strong. With a much higher price to start the day it was to be expected that the percent change on the day would lag the other market oriented indexes.

So is today the beginning of the elevated volatility we have been waiting for?  Only time will tell.

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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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