Implied Volatility for the FXI China ETF August Options Jumped 20% the Past Two Days

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.   1 - FXI 5-day

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. 2 - FXI Livevol

CBOE calculates and disseminates the CBOE China ETF Volatility Index (ticker VXFXI), which reflects the implied volatility of the FXI ETF. Today the VXFXI rose 0.62 to close at 30.99. 3 - VXFXI Aug

MORE INFORMATION

For more information and charts on volatility, please visit www.cboe.com/volatility and www.livevol.com.