August 18 – A report today at http://money.cnn.com noted that –
“The bears have returned in China. The Shanghai Composite shed 6.2% on Tuesday, once again bringing the key index below the 3,800 point mark. …Tuesday’s slump was the sharpest decline since July 27.”
RISE IN IMPLIED VOLATILITY FOR THE AUGUST FXI OPTIONS
A key issue for options investors is – how does the volatility in the Chinese stock markets impact the prices and implied volatility of exchange-listed options around the world? The first chart below shows a red line with the implied volatility estimates by Livevol for options on the iShares China Large-Cap ETF (FXI) that expire this Friday, August 21 – this implied volatility rose from around 27.9 on August 14, to 33.6 today, a 20% rise over two trading days.
SIX-MONTH CHARTS SHOW A RISE IN FXI IMPLIED VOLATILITY
Below are six-month charts that show a rise in implied volatility for the FXI ETF.
This chart has a red line (IV30) to show Livevol’s estimates of 30-day implied volatility, and a light blue line (HV30) to show Livevol’s estimates of 30-day historic volatility. Options investors often keep a close eye on the spread between these two estimates to help them identify options that may possibly be cheaply or richly priced.