Record Volume Day for CBOE and SPX Options, as VIX Index Has Its Biggest One-Week Jump

This past week the CBOE Volatility Index® (VIX®) rose 118.5%, its largest move ever (in percentage terms) in one calendar week. On Friday CBOE®, C2 Exchange and the CBOE’s S&P 500® (SPX) options all experienced record volume days, with estimated volume of 11 million options contracts traded on CBOE.  A news report at Marketwatch noted –“Across the globe, investors dumped anything with a whiff of “risk” as an economic slowdown in China accelerates, resulting in rapidly plunging oil prices and complicating the Federal Reserves aim of normalizing interest rates.”

  1. DAILY VOLUME THIS PAST WEEK FOR KEY INDEX CONTRACTS

As shown in the charts below, trading volume in key index contracts – VIX futures and options on the S&P 500, the Russell 2000, and VIX indexes – grew tremendously in the second half of the week. The put/call ratios for the SPX options were much higher the ratios for VIX options. For portfolio protection, some investors were buying SPX protective puts and collars, and/or taking long positions in VIX call options and VIX futures. MM1 SPX and RUT volumeMM2 VIX fut opt volume one week jpg

  1. BIGGEST WEEKLY MOVES FOR VIX INDEX

As shown in the table below, the biggest one-week moves (in percentage terms) for the VIX Index have been upside (rather than downside) moves.  MM3

  1. PRICE CHARTS FOR THE PAST WEEK

The VIX Index end-of-week values rose from 12.83 to 28.03 over the past week. The S&P 500 index (SPX) fell below its 200-day moving average on Thursday and turned negative for the year. During the week the index lost about $1.1 trillion in value. MM4 - VIX SPX week

  1. VIX WEEKLY FUTURES – MORE RESPONSIVE

Prior to this summer, VIX futures had Wednesday “standard” expirations once a month, but now there are VIX Weekly futures with expirations on multiple Wednesdays in the near-term month. It is expected that VIX Weekly futures offer more opportunities to investors, particularly because the Weeklys often could have more responsiveness to market events than the standard expiration VIX futures.  Please see all of the charts below for data on VIX weekly futures. During last week the settlement prices for the “Week 34” VIX futures (expiring Wednesday, August 26), rose 69.9%, while the standard expiration VIX futures (expiring Wednesday, Sept. 16) rose 31.6%. MM5 - VIX weekly price

  1. VIX FUTURES ROSE ON FRIDAY AUGUST 21

For investors who are considering VIX futures, the table below shows valuable information re: the price movements on Friday for twelve expirations of VIX futures. Note that the near-term futures generally had bigger movements than the long-dated futures. MM6 - VIX fut table on Aug 22

  1. CHANGES FOR INDEXES, COMMODITIES AND VIX FUTURES OVER THE PAST WEEK

The chart below shows last week’s percentage changes for select indexes, commodities and VIX futures. MM7 - 1 week many

Note that while the S&P 500 Index fell 5.7%, new CBOE benchmark indexes that used options – the CBOE S&P 500 Zero-Cost Put Spread Collar (CLLZ), CBOE S&P 500 Iron Condor Index (CNDR), and the CBOE S&P 500 Multi-Week BuyWrite Index (BXMW) – were able to mitigate some losses through use of options this past week.  To learn more about benchmark indexes and risk management and related prices and risk disclosures, visit www.cboe.com/benchmarks.

CONCLUSION

To learn more about how index options and VIX futures and options can help you manage the risk in your investment portfolio, visit the Education and Strategies sections at www.cboe.com. The page www.cboe.com/benchmarks has links to benchmark indexes and several white papers that provide information on generating added income and managing volatility.