Emerging Market Volatility in 2014

Despite the Brazilian market experiencing excessive volatility in 2014, the CBOE Emerging Markets ETF Volatility Index (VXEEM – 22.26) was at relatively low levels. The iShares Emerging Markets ETF (EEM – 39.29) ended 2014 down a little over 3% which was better than many market observers were expecting. Also, note on the chart below that VXEEM ended the year about where it started the year, which stands out relative to many other volatility indexes which finished the year higher than where things started out.

EEM VXEEM

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Brazilian Volatility in 2014

The chart below shows what volatility does leading up to an uncertain election in an emerging market. The CBOE Brazil ETF Volatility Index (VXEWZ – 34.21) looked more like a chart of implied volatility for a one product biotech stock in front of a do or die FDA announcement. What happened after the election was a bit unexpected, at least by the author of this blog. Post—election volatility has remained high regardless of the performance of the iShares MSCI Brazil Capped ETF (EWZ – 36.57). Initially it seemed that the market was less enthusiastic about the reelection of Dilma Rousseff than the majority of Brazilians who voted for her. Since then lower oil prices and a series of company specific issues at Petrobras (PBR – 7.30) have resulted in elevated risk perceptions with respect to Brazil.

EWZ VXEWZ

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Nasdaq-100 Volatility in 2014

Of the three broad based market indexes that have tradable volatility markets, the Nasdaq-100 (NDX – 4236.28) was the clear winner in 2014. NDX rose almost 18% on the year while the S&P 500 was up 11.4% and the Russell 2000 gained only 3.5%. With the tech and biotech sector in favor for most of 2014 volatility as priced in by NDX options was relatively low.

NDX - VXN

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Oil Volatility in 2014

In 2013 it was gold, this year the price of oil took it on the chin and the result was the worst performance for the United States Oil ETF (USO – 20.36) since the dark days of 2008. There are all kinds of theories over what is actually going on in the energy markets. I’m going to keep mine to myself and focus on what the numbers say.

With USO dropping 42% in 2014 and most of that coming in the fourth quarter the CBOE Crude Oil ETF Volatility Index (OVX – 50.24) reached levels not seen since 2011. I usually do not like to post charts where the lines cross like the one below, but I don’t think a different scale would do justice to the move in OVX over the last few weeks of 2014.

USO OVX Corrected

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Gold Volatility in 2014

In 2014 the price of Gold did not have any of the headline grabbing moves like those that occurred in 2013. The SPDR Gold Shares ETF (GLD – 113.58) finished the year down a little over 2% and was down 1.4% on the last day of the year. If we had taken New Year’s Eve off GLD was have been practically unchanged on the year. The chart below shows the daily closing prices for GLD and the CBOE Gold ETF Volatility Index (GVZ – 20.08) for this past year.

GLD - GVZ

If it were not for the fourth quarter this would be what I call a Seinfeld blog – about pretty much nothing. The increased implied volatility that occurred in GLD option trading to end the year was more about other markets than gold. A huge drop in the price of oil and increased global equity market volatility greatly influenced volatility in other sectors that did not experience the same sort of price changes. The gold market in the fourth quarter is a great example of how volatility in one market sector may influence the volatility of options in a loosely related market.

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Volatility Indexes and ETPs in 2014

During the first half of 2014 I got to have several conversations about whether or not VIX was ‘broken’ since the average level for VIX was so low. Needless to say I haven’t fielded a single call or email about VIX being broken since October. 2014 was a pretty interesting year in volatility trading. More market participants have become involved in the volatility markets through VIX future, options, or ETPs.

Index ETPs - Corrected

The table below shows the year over year change for the S&P 500, volatility indexes that focus on the S&P 500, and several volatility oriented exchange traded products. Year over year changes in volatility indexes don’t mean anything to me as a single day (think the last day of 2014) can dramatically change the year over year number. The average for the year is a little more meaningful. I’ll get to that after discussing the ETPs in 2014.

 

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Blogging Options: CBOE Mid-Day Commentary 12.31.14

Stocks drifting at lower levels as the final bell of 2014 grows near.  SPX & NASDAQ with double-digit gains for 2014.  Volume very light early this afternoon, as expected.  VIX up 20% to trade with a 19 handle. Have a good New Years Eve and day, Don’t forget Chicago BlackHawks at noon CST tomorrow as they play outdoors in Washington, D.C.  Volatility as an asset class

Technology device stocks option implied volatility is flat into International CES that opens in Las Vegas on January 6.

Ambarella (AMBA) overall option implied volatility of 58 compares to its 26-week average of 53.

GoPro (GPRO) overall option implied volatility of 55 compares to its 26-week average of 56.

HP (HPQ) overall option implied volatility of 24 compares to its 26-week average of 25.

Xerox (XRX) overall option implied volatility of 25 compares to its 26-week average of 24.

BlackBerry (BBRY) overall option implied volatility of 49 compares to its 26-week average of 52.

Sony (SNE) overall option implied volatility of 31 compares to its 26-week average of 28.

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) up 0.55% to 5.44; 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) up 1.9% to 28.94, WTI trades below $54 cboe.com/micro/VIXETF/VXXLE/

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Blogging Options: CBOE Morning Update 12.31.14

US Stock futures up fractionally, Weekly Claims rise a little more than expected, Crude drops again, trading below $53 per bbl.  Kink Abdullah of Saudi Arabia reportedly hospitalized for tests mat be adding to price instability.  10-year 2.18%. Regular trading hours today.  Volatility as an asset class:

Chevron (CVX) is down 60c to $112.51 in the premarket as WTI Crude Oil trades below $54. January call option implied volatility is at 30, March at 23; compared to its 26-week average of 20.

Exxon Mobil (XOM) is off 37c to $92.65,  January call option implied volatility is at 22, March is at 21; compared to its 26-week average of 19.

ConocoPhillips (COP) is up 26c to $70.19. Overall option implied volatility of 30 compares to its 26-week average of 20.

BP (BP) is up 23c to $38.59 in the premarket. January call option implied volatility is at 28, March is at 26; compared to its 26-week average of 19.

Options expected to be active at CBOE: AAPL GRPO FB

Equity Options volume at CBOE: 659,330 calls, 437.283 puts, 1,096,613 total
CBOE S&P 500 PutWrite Index (PUT) at 1463.90, 50-day moving average is 1439.56 www.cboe.com/PUT

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 5.41, 52-week low 1.69, high 14.58 www.cboe.com/vxtyn
CBOE Crude Oil Volatility Index (OVX) at 51.17, compared to its 50-day moving average of 38.68, WTI Crude oil trades below $54. cboe.com/OVX
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The CBOE Skew Index Reaches Levels That Say A Correction May Be Coming

(Editors Note:  This sent to us from Bob Lang late last Friday night.  Enjoy)

I wrote about the CBOE Skew Index here a couple of months ago and talked about how it had become a fantastic predictor of correction market moves in 2014. To review, the skew index is a compilation of bets placed on out of the money options, mostly puts. These bets are ‘looking’ for a big move south very quickly, perhaps the result of some sort of ‘black swan’ event. For the most part, these tail risk bets rarely pay 0ff – mostly 5% of the time or less.

But when they do, the gains are sharp and quick. Many option players buy these options as protection or a hedge against an overbought market condition. We are bumping up against an overbought condition that may produce another sharp correction – soon. See the skew index below.

BL SKEW

What I have found interesting in 2014 is when the skew index spikes (more bets on these increase the price of the index) there has been a good-sized correction every time. The major high in skew was in mid September, and what unfolded afterwards was a 9.4% correction. All others this year were swift but mild, about 4-6% in size and no more than two weeks in duration. More recently the skew hit near 138 and a 5% correction ensued.

However, correction calls with a high skew generally are coupled with a low volatility index, or VIX. In just about every case in 2014 the VIX was 13% or lower when skew was high, in one case it was close to 10%. That is a reading of high complacency and buyers have likely finished. When the buying is done there is nothing left to do but sell. The smart money will reach for protection when it’s cheap (as it is when VIX is low) to guard against losses on their long stock/option plays.

 

It is hard to understand this counter play being successful. Buying a 5% probability expecting a payoff is a very poor bet, but the point is buying insurance BEFORE something disastrous occurs. Further, the ‘hope’ is that this protection does not pay off, but it’s good to have just in case. If you do not have fire insurance on your house and all the sudden your neighbor’s roof is in flames, you’re not on the phone with your insurance agent looking for coverage, right?

In addition, the MC oscillators have clocked in now over 100 on both the NYSE and Nasdaq, as breadth has been strong over the last several days (Dow Industrial’s up 7 days straight). That is not yet to an extreme overbought but it is headed there.

So, we are currently at 135 on the skew index, not the highest level of the year and a VIX at 14.5% – also not the lowest reading. But this is something we need to be aware of as the holiday trading continues we should see volatility drop even more, and as that happens we’ll see the smart money reaching for cheap protection. Not a bad idea for us to do, too. I’ll be watching both of these closely.

CBOE SKEW Index – Highest Levels in 2014 Show Demand for Downside Protection with SPX Puts

In 2014 the CBOE SKEW Index (ticker: SKEW) is poised to set an all-time record for its highest average daily closing value in a year, as its average daily closing value is 129.7 in 2014 (through December 29).

The previous high average daily closing value for SKEW in a year was 122.5 in 2011.  skew 12 14

 

BACKGROUND ON SKEW INDEX

CBOE SKEW Index values, which are calculated from weighted strips of out-of-the-money S&P 500 options, rise to higher levels as investors become more fearful of a “black swan” event — an unexpected event of large magnitude and consequence. The value of SKEW increases with the expected tail risk of S&P 500 returns. If there were no tail risk expectations and concerns, SKEW would be close to 100.

COMPARING LEVELS OF VIX AND SKEW INDEXES

Some observers recently have asked if the CBOE Volatility Index® (VIX®) has been somewhat low in 2014 considering the level of worldwide geopolitical uncertainties and nervousness. During the years 1990 through 2013, the average daily closing values were 20.2 for VIX and 117.2 for SKEW.  So while the VIX recently has been below its long-term average, it is worth noting that the historic volatility of the SPX usually has been even lower than the VIX, and in 2014 the SKEW Index has been about 13 points above its long-term average. So in 2014 one might infer that the demand for out-of-the-money SPX puts (and disaster insurance) probably has increased relative to demand for at-the-money SPX options.

It is interesting to note that expected volatility for small-cap stocks (as represented by the CBOE Russell 2000 Volatility Index (RVX)) usually has been higher than that of large-cap stocks (as represented by the VIX Index).

MORE INFORMATION

Futures and options now are available on the VIX, RVX, and other volatility indexes, and the SKEW Index can be helpful to those who are investing in SPX options. To learn more about the SKEW, VIX, RVX, and dozens of other volatility-related indexes, please visit www.cboe.com/volatility.

Blogging Options: CBOE Mid-Day Update 12.30.14

Utilities off ~1.6%, surprising with yields falling this morning.  Stocks soft on light volume, Crude pretty quiet with fractional losses. Volatility as an asset class

Select Sector SPDR ETF’s are trading near record highs with mixed option implied volatility

Consumer Discretionary Sector SPDR (XLY) overall option implied volatility of 13 compares to its 26-week average of 14.

Industrial Select Sector SPDR (XLI)  option implied volatility of 15 compares to its 26-week average of 14.

Health Care Select Sector SPDR (XLV)  option implied volatility of 18 compares to its 26-week average of 16.

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) down 0.71% to 5.57; 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Volatility Index – VIX methodology for Energy Select Sector SPDR (VXXLE) up 2.8% to 28.28, WTI trades below $54 cboe.com/micro/VIXETF/VXXLE/

CBOE Crude Oil Volatility Index (OVX) down 4.4% to $51.29 cboe.com/OVX

Active options at CBOE: AAPL TSLA TWTR GILD AMZN TWTR NFLX BAC AA JPM CMCSA JPM VIX SPX

Options with increasing volume @ CBOE: ALLT NYRT DAR MAC QLGC CLF

CBOE Volatility Index (VIX) is up 0.84 to 15.90; January 16 and 17 calls are active on total volume of 154K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures (VXX) is up 49c to 29.

CBOE S&P 500 Short-Term Volatility Index (VXST) is higher by 0.89, at 13.88; compared to its 10-day moving average of 14.30 stks.co/r0CS2

CBOE DJIA BuyWrite Index (BXD) down 3c to 265.95 compared to its 50-day moving average of 261.92 cboe.com/micro/bxd/

S&P 100 Options (OEX) is lower by 2.98 to 919.24 as bonds rally to record highs into the New Year.

Nasdaq Composite Picking Up Steam – Weekly Market Outlook

Last week was a fairly typical Christmas holiday-split week, marked by weak volume before and after the day off, and a slight gain on par with the beginning of an average Santa Claus rally (not to mention the tepid bullishness in front of the Christmas break).  Though the trend was up more or less, take last week’s price action with a grain of salt, as last week was anything but a normal one.  Let’s first examine – and chart – last week’s big economic news.

Economic Data

The holiday-abbreviated trading week was still chock-full of economic information, much of which we do need to mention and chart for you (just for some added perspective).  And for what it’s worth, though the strong GDP figure for Q3 overshadowed most everything else, there were a couple of red flags to keep in mind.

One of those red flags was on the home sales front.  The pace of existing home sales slumped from 5.25 million to 4.93 million in November, while the pace of new home sales fell from 445,000 to 438,000.  At this point it’s difficult to deny we’re seeing stagnation here.

Durable goods orders slipped, rather than grew as expected.  Overall orders fell 0.7% in November, and fell 0.4% when taking transportation orders out of the equation.  We can’t quite say the durable orders uptrend is weakening [the month-to-month volatility is normal, and even predictable].  But, it’s certainly not accelerating.

And of course, Q3’s final reading on GDP growth was even better than first anticipated.  The economy grew at an annualized pace of 5.0%.  That was the highest reading since the first quarter of 2006, and it was on the way down then.  This time, it’s clearly on the way up.  This bodes well for the long-term market trend.

Economic Calendar
PH 122814-econ-data

Source:  Briefing.com

As you can see, this week’s data is minimal, though both pieces of information are relatively important (ISM & Construction Spending).
Stock Market Index Analysis

First and foremost, know that the overall underlying trend is still a bullish one, so we have to assume stocks will remain in bullish mode until we have clear evidence otherwise.  That being said, it’s not a stretch to say the bullish momentum waned last week, which is how pullbacks begin.  What we have to acknowledge about that waning momentum is, however, it may have simply been a holiday lull.

What’s bullish?  For the S&P 500 (SPX) (SPY), the break above the former ceiling around 2075 and the move to record-highs is bullish.  Ditto for the %R indicator (smoothed in the BigTrends method), which moved above the 80 level two weeks ago and has been content to stay every since — a sign of bullish trend strength.  Though technically it’s a sign that the S&P 500 is overbought, one only has to look back to late October to realize this market is capable of getting overbought and staying overbought for days on end, and continue rallying the whole time.  And, for good measure, we also have a bullish MACD cross.

PH 122814-sp500-daily

The CBOE Volatility Index (VIX) (VXX) ended the week at 14.50 — watch the 12/12.5 and 16 levels from here, the next break of those may be important for this measure of option implied volatility.

Charts created with TradeStation
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Everyone Loves Small Cap Stocks – But What Does the Market Say?

For most of 2014 the Russell 2000 has been the red headed step child of the US equity market. Small caps ruled the roost in 2013 but lost their luster for most of this year. That is until recently. I’m currently taking the week off from CBOE which means I spend all day watching the business networks. I hear lots of positive comments regarding small cap stocks and their prospects for next year. It is one thing to hear people on TV tell us such things, but it is more important to see some numbers to back up such claims. This, as everything does in my world, leads me to VIX (and RVX).

VIX is a consistent 30 day measure of implied volatility as indicated by S&P 500 Index option pricing. RVX is also a 30 day measure of implied volatility, but uses the pricing of Russell 2000 Index options. A common method of seeing what the market thinks, risk wise, for large caps versus small caps is to compare the levels of RVX and VIX. The chart below shows the daily closing ratio for 2014 as determined by dividing RVX by VIX.

RVX - VIX 2014

When the line on this chart is at the high end of the range it may be interpreted as the market pricing more risk into owning small cap stocks than being invested in large cap stocks. This year the average RVX / VIX ratio has been just under 1.40. This is actually higher than average for the past few years.  This makes sense because for most of 2014 the Russell 2000 underperformed the S&P 500. To me a couple of things stand out on this chart.

First look back to mid-October (highlighted by the purple circle) where the ratio of RVX divided by VIX approached 1.00. Since that time the Russell 2000 is up 13.6% while the S&P 500 has rallied 12.2%. It is also worth noting that when this ratio approached 1.00 the Russell 2000 was down 6.7% for 2014 and the S&P 500 was up less than 1%. I know looking backwards is easy with respect to the financial markets, but it is interesting small caps began to match the performance of large cap stocks after the respective volatility indexes indicated less concern regarding small cap versus large cap stocks.

The other thing that stands out to me is where RVX and VIX are at this moment (or as of the close yesterday – 12/29). The ratio closed at 1.27 which is closer to the historical average and below the average for 2014. Stated plainly, everyone on TV seems to like small cap stocks in 2015.  RVX versus VIX doesn’t dispute what they are saying, at least not for the moment.

Blogging Options: COE Morning Update 12.30.14

Quiet overnight – Asia and Europe off ~1% –  as traders watch Greece and Brent Crude. 10-Year at 2.17%, 30-Year at 2.74%. Little economic news to push stocks today. TSLA off on light volume as China expected to extend tax credits on battery powered vehicles for an additional 4 years.  Full trading schedule tomorrow, New Years Eve.  Volatility as an asset class

Option implied volatility stays elevated for oil ETF’s as WTI Crude Oil trades at five-and-half year lows on oversupply

Energy Select Sector SPDR (XLE) overall option implied volatility of 25 compares to its 26-week average of 22.

Oil Services Holders Trust (OIH) overall option implied volatility of 32 compares to its 26-week average of 23.

United States Oil Fund (USO) overall option implied volatility of 47 compares to its 26-week average of 26.

SPDR S&P Oil and Gas Exploration and Production ETF (XOP) overall option implied volatility of 44 compares to its 26-week average of 28.

Options expected to be active at CBOE: RSX UNG XLE PBR MU NEM CVEO AAPL

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Homeowner’s Insurance, VIX, and the Hurricane Analogy

When we introduce aspiring option traders to the various pricing factors that determine the value of an option contract we often use an insurance analogy to describe implied volatility. The short version of the story is that implied volatility is the pricing factor that is closely associated with the risk of price movement in the underlying market.  We expand on this idea using the idea of the cost of homeowner’s insurance as a hurricane is bearing down on south Florida. If a homeowner has forgotten to renew their homeowner’s insurance they are going to find the policy cost as a hurricane is approaching their home much higher than during a period of calm weather. This increased cost is a function of higher risk of the home being destroyed in the near future. Stock option prices usually move higher in front of anticipate price moving events such as a new product announcement or earnings report. This increase in the option premium is associated with higher implied volatility much like the higher insurance policy premium is a function of higher risk for policy seller.

VIX is a consistent measure of 30 day implied volatility as indicated by S&P 500 Index (SPX) option pricing.   VIX has moved in the opposite direction of the S&P 500 about 80% of trading days over the past few years.  A very common question is, “why do VIX and the S&P 500 move in opposite directions?”  I’ve been thinking of ways to describe the ‘why’ behind this behavior in relation to the insurance analogy we use with respect to implied volatility.

With the description of higher implied volatility in relation to the cost of a homeowner’s policy the participants in the contract know a hurricane is on the way.  That’s why the insurance company would charge more for the homeowner’s policy and the unhappy homeowner would expect to pay up for protection.  We also tend to have a good idea of pending events that will move an individual stock price.  With the overall stock market it is not as easy to anticipate events that will move the markets.

Think of the reaction of VIX as if there were no way to forecast the weather other than what the weather is doing at the current moment. Before a hurricane hits there is usually heavy rain and a thunderstorm. Without a forecast of what is next, people living in south Florida may over prepare each time there is a bad storm.  If all they have to judge that a hurricane is on the way is the current weather there is no way of knowing if this the time the storm is the beginning of something worse.

In the financial markets when the S&P 500 shows some weakness portfolio managers may be uncertain if even a minor sell off is the beginning of a bigger move to the downside.  Based on this concern managers often seek portfolio protection through purchasing S&P 500 put options. This increased demand results in higher implied volatility as indicated by higher SPX option premiums. This translates into higher VIX. On the other side of the equation, when the markets are moving higher or are a little stagnant, managers may not be as aggressive when seeking portfolio protection which would translate into VIX moving down.

Blogging Options: CBOE Mid-day Update 12.29.14

Volatility as an asset class

VIX methodology for Goldman Sachs (VXGS) up 3.3% to 24.66, compared to its 50-day moving average of 22.07. cboe.com/VXGS

VIX methodology for Apple (VXAPL) up 3.3% to 29.83 compared to its 50-day moving average of 25.68. cboe.com/VXAPL

VIX methodology for Amazon (VXAZN) up 3.7% to at 37.12, compared to its 50-day moving average of 32.83. cboe.com/VXAZN

VIX methodology for Google (VXGOG) up 5% to 25.98, compared to its 50-day moving average of 22.16. cboe.com/VXGOG

VIX methodology for IBM (VXIBM) up 7.6% to 23.53, compared to its 50-day moving average of 23.54.  cboe.com/VXIBM

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Blogging Options: CBOE Morning Update 12.29.14

Markets digesting the gains of the last few weeks.  Elections in Greece trying to pull markets lower this morning, and oil disruptions in Libya have Brent Crude trading higher.  Full trading schedule through Wednesday, trains empty on way in this morning.  Volatility as an asset class

Manitowoc (MTW) is up $2.09 to $23.01 in the pre-market after activist investor Carl Icahn revealed in a regulatory filing that he has taken a 7.7% stake in the maker of heavy cranes and food service equipment. Option implied volatility of 42 compares to 26-week average of 38.

Gilead (GILD) is up $2.03 to $95.82 in the premarket after Morgan Stanley upgraded the stock to Overweight from Equal Weight following the recent sell-off  in response to pharmacy benefits manager Express Scripts (ESRX) excluding the company’s hepatitis C treatment in most of its plans in favor of AbbVie’s (ABBV) lower-cost regimen. January weekly call option implied volatility is at 36, January is at 39, February is at 40; compared to its 26-week average of 35

Options expected to be active at CBOE: AMZN TWTR GILD MTW

CBOE S&P 500 PutWrite Index (PUT) at 1464.40, 50-day moving average is 1436.80 www.cboe.com/PUT

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 5.31, 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Crude Oil Volatility Index (OVX) at 54.68, compared to its 50-day moving average of 37.89, WTI Crude oil trades below $56. cboe.com/OVX

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The Week in VIX – 12/22 – 12/26

On Friday VIX rose as the S&P 500 hit the 52nd record high of 2014. I got a question via Twitter about VIX rising when the S&P 500 rises. About 20% of trading days witness VIX and the S&P 500 moving in the same direction, but when the S&P 500 is making a new high it may turn some heads. I think part of the small rise in VIX on Friday may be attributed to the holiday impact on the VIX calculation. What I mean by that is when we closed Wednesday the markets were closed for a day and a half. The VIX calculation only takes calendar and not trading days into the equation. This causes VIX to be under a little extra pressure in front of weekends and more so in front of long weekends. A bit of the upside in VIX on Friday may be attributed to the holiday being behind us. What makes me pause a little is that VIX closed Friday at 14.50 when the average VIX close this year on S&P 500 record days is 12.48 this year. VIX two points higher than that average as we make another new high would be more concerning to me than the rise of VIX on Friday.

VIX SPX Record Dates

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The Week in Volatility Indexes and ETPs – 12/22 – 12/26

This past week the S&P 500 recorded a record high on 3 of the 4 trading days with Friday being number 52 in 2014. I did some digging on this topic and 52 new highs in a year is less than the number of new highs just last year. Last year the S&P 500 set 69 new highs, but that still isn’t the record number of new highs in a single year. 1995 holds that distinction with the S&P 500 closed at a record level 77 times.

The term structure curve is returning to normal based on the price action in the S&P 500 last week, but still elevated relative to record S&P 500 days. VXST is seeing some extra pressure due to the holiday this coming week.   The longer end of the curve shifted lower, but not nearly as much as the drop in VIX and VXST. I also added a third curve here to compare volatility on the 52 days the S&P 500 closed at a record high this year with Friday’s close. Note the purple line is much lower than Friday’s closing curve.

VXST - VIX - VXV - VXMT More

CBOE Mid-Day Update 12.26.14

Volatility as an asset class

Oil indexes and ETF option implied volatility is elevated as WTI Crude oil trades below $57

ProShares Ultra DJ-UBS Crude Oil (UCO) overall option implied volatility of 92 compares to its 26-week average of 45.

Energy Select Sector SPDR (XLE) overall option implied volatility of 26 compares to its 26-week average of 23.

United States Natural Gas Fund (UNG) overall option implied volatility of 59 compares to its 26-week average of 37.

Oil Services Holders Trust (OIH) overall option implied volatility of 34 is compares to its 26-week average of 25.

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) down 0.08% to 5.31; 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) down 1.7% to 27.05, WTI trades below $57 cboe.com/micro/VIXETF/VXXLE/

CBOE Crude Oil Volatility Index (OVX) down 1.1% to $55.47 cboe.com/OVX

Active options at CBOE: AAPL TSLA TWTR GILD AMZN TWTR NFLX BAC BIDU KO

Options with increasing volume @ CBOE: CAH OUTR TWO POWR LFC EXPW IPXL

CBOE Volatility Index (VIX) is recently up 11c to 14.49; January 20, 23 and 26 calls are active on total volume of 100K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures (VXX) is recently down 7c to 28.24
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Blogging Optiions: CBOE Morning Update 12.26.14

Regular trading hours today but trains empty into work this morning.  Boxing Day holiday today, several major exchanges around world are closed  (England, Hong Kong, Australia, etc., and as St Stephens Day in South Africa). Futures higher, trying to add on to Wednesdays (light volume) higher close.  Brent Crude above $60 bbl, Nat Gas ticked below $3 this morning.  Russia says Ruble crisis over, so that’s good.  Volatility as an asset class:

Market-Vector Russia ETF Trust (RSX) is recently up 24c to $16.19 in the premarket as the Russian Ruble rises as the Russian economy appears to stabilize with energy prices. January call option implied volatility is at 57, February is at 51, May is at 45; compared to its 26-week average of 33.

Options expected to be active at CBOE: TSLA CZR MU HLF

CBOE S&P 500 PutWrite Index (PUT) at 1462.45, 50-day moving average is 1435.48 www.cboe.com/PUT

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 5.39, 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Crude Oil Volatility Index (OVX) at 54.88, compared to its 50-day moving average of 37.52, WTI Crude oil trades below $57. cboe.com/OVX

CBOE S&P 500 Skew Index (SKEW) at 135.64, compares to its 50-day moving average of 129.23.

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CBOE Mid-Day Update 12.24.14

Volatility as an asset class

Global option implied volatility stays elevated on wide price movement

iShares FTSE Xinhua China 25 Index (FXI) overall option implied volatility of 24 compares to its 26-week average of 20.

MSCI Brazil Index (EWZ) overall option implied volatility of 31 compares to its 26-week average of 29.

iShares MSCI Germany (EWG) overall option implied volatility of 24 compares to its 26-week average of 20.

Active options at CBOE: AAPL TSLA TWTR AMZN FB PBR GILD

Options with increasing volume at CBOE: ACHN CELG GPS

Active calls @ CBOE; ACHN Jan 16 AAPL 12/26/14 113 114 & 115

Active puts @ CBOE; AAPL 12/26/14 111 & 112 PBR 2/20/15 8 NKE 1/30/15 94

CBOE Volatility Index (VIX) is recently down 67c to 14.13; January 13 and 18 puts are active on total volume of 17K cboe.com/VIX

S&P 100 Options (OEX) recently is recently up 1.08 to 921.06 as investors continue to bid up stock prices to record highs after last week’s statement by the Federal Reserve that it would take a patient approach to raising interest rates.

VIX and the Santa Claus Rally

A couple of days ago JJ Kinahan from TD Ameritrade and a good friend of The Options Institute wrote a blog for Forbes.  His blog was about the period of time between Christmas and New Year’s. In the financial markets world this is considered a bullish time for stocks and is often called the Santa Claus rally. His comments can be found at the link below.

http://www.forbes.com/sites/jjkinahan/2014/12/22/volatility-update-santa-rally-or-early-vacation-for-the-big-guy/

Since everything I do begins and ends with VIX I decided to take a look at what VIX has done each year over this time period. I was honestly surprised by the results. I took the VIX closing price the day before Christmas and the closing price on the last day of the year for each year from 1990 to 2013.   If the expectation is that stock prices move higher over this time period, then we would also assume that VIX would be moving lower. That assumption made me do a double take when I complied the table below.

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Blogging Options: CBOE Morning Update 12.24.14

Holiday shortened trading schedule today in US, Europe on early schedule as well.  Weekly Claims with a slight drop. Crude lower.  US Futures up modestly. Volatility as an asset class:

Large Cap oil Services Company’s volatility is elevated as WTI Crude oil trades below $56

Baker Hughes (BHI) overall option implied volatility of 36 compares to its 26-week average of 28.

Halliburton (HAL) overall option implied volatility of 38 compares to its 26-week average of 29.

National Oilwell (NOV) overall option implied volatility of 28 compares to its 26-week average of 25.

Schlumberger (SLB) overall option implied volatility of 29 compares to its 26-week average of 25.

Options expected to be active at CBOE: ACHN JNJ CALM BP

CBOE S&P 500 PutWrite Index (PUT) at 1461.76, 50-day moving average is 1434.42 www.cboe.com/PUT

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 5.56, 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Crude Oil Volatility Index (OVX) at 53.97, compared to its 50-day moving average of 37.17, WTI Crude oil trades below $56  cboe.com/OVX

CBOE Volatility Index (VIX) at 14.80, compared to its 50-day moving average of 15.79. cboe.com/VIX

SPDR S&P 500 ETF Trust (SPY) is up 35c to $208.10 as U.S. benchmark indices closed at record highs yesterday,

Calls with increasing volume at CBOE:

NQ    1/15/2016    5      20K contacts
MET  1/15/2016  57.50 20K
NSM 1/17/2015   35    15K
EMC  1/17/2015   30    14K
XLF    1/17/2015   25    10K
APOL 1/17/2015 31 9K
IWM 12/26/2014 121 8K

Trader Looking for a Better 2015 for Emerging Markets

At least one trader is looking for 2015 to be a green year for emerging markets. In trader-speak a green year means higher levels. Earlier this week, when the iShares MSCI Emerging Markets ETF (EEM) was trading around 39.30 there was a buyer for a very long dated call spread. Looking to December of 2015 and EEM being at or above 41.50 a buyer came into the market purchasing 50,000 EEM Dec 2015 38.50 Calls at 3.85 and selling 50,000 EEM Dec 2015 41.50 Calls for 2.30 and a net cost of 1.55.

EEM PO

As seen in the payoff diagram above this trade will return a profit of 1.45 if EEM is at 41.50 or greater at expiration. This involves a gain of around 6%. However, something to keep in mind is that EEM pays dividends and those dividends will reduce the share price of the ETF. Based on recent history two EEM dividends will be paid, one in June and the other just before December expiration next year. So a 6 percent price return would mean a little bit more of a total return for the emerging markets for this trade to work as hoped for by one trader bullish on emerging markets next year.

Trade Looking for Lower VIX into 2015

December VIX settlement was last week and traders are starting to look to next year. Late Monday afternoon one of these traders took a position looking for VIX to return to the low teens in early 2015.   With VIX around 15.70 and the January VIX future at a 0.75 premium to the index at 16.45 a trader came in and bought a Jan VIX 14 / 15 Put Spread. The specific trade was a purchase of 4500 of the VIX Jan 15 Puts at 0.95 and sale of 4500 VIX Jan 14 Puts at 0.46 and a net cost of 0.49. The payoff at expiration for this bear put spread appears below –

VIX po

January VIX settlement at or below 14.00 will result in a gain of 0.51 on this spread. A partial profit may result from settlement between 14.00 and 14.51. Over 14.51 this trade starts to turn into a loser with a maximum loss equal to the 0.49 paid for the spread.

Big (sorta) Bearish SPX Strangle from Monday

Yesterday a trader came in to the SPX pit with an outlook that involves a (somewhat) range bound market through mid-February of next year. With the S&P 500 around 2070 there was a seller of just over 39,000 SPX Feb 20th 1860 Puts at 9.30 who also sold the same number of SPX Feb 20th 2150 Calls at 11.00 for a net credit of 20.30. We never know the end game or the mindset of the trader in these situations. However, we can always take a look at what the trade will do if held to expiration. In this case the profit or loss for selling the SPX Feb 20th 1860 – 2150 Strangle at 20.30 shows up below.

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Review of Volatility in 2014 (Part 2) – Brazil VIX Hit 72.83; Oil VIX Hit 57.55

Dec. 22, 2014 – Looking back on commodity volatility and global volatility in 2014, I’d like to highlight a couple of volatility indexes that shot up to daily closing highs for the year –

  1. The CBOE Crude Oil ETF Volatility Index (OVX) closed at 57.55 on Dec. 15 as oil prices plummeted (the average daily close for the OVX this year is only 22.3), and
  2. The CBOE Brazil ETF Volatility Index (VXEWZ) closed at 72.83 on October 20, before the presidential election in Brazil (the average daily close for the VXEWZ this year is 31.3),

So far in 2014 (through December 22) –

  • CBOE Crude Oil ETF Volatility Index (OVX) is up 209%,
  • the CBOE Brazil ETF Volatility Index (VXEWZ) is up 45%, and
  • crude oil prices are down about 44%.

Futures and options are available on the OVX, VXEWZ, VIX, and other volatility indexes.

ALIGNED CHARTS WITH FIVE VOLATILITY INDEXES

A - B Commdo Glob

MORE GLOBAL TOOLS IN 2015 More

CBOE Mid-Day Update 12.23.14

Volatility as an asset class

VIX methodology for Goldman Sachs (VXGS) down 4.1% to 24.38, compared to its 50-day moving average of 22.59. cboe.com/VXGS

VIX methodology for Apple (VXAPL) down 0.7% to 28.09, compared to its 50-day moving average of 26.04. cboe.com/VXAPL

VIX methodology for Amazon (VXAZN) down 3% to at 33.97, compared to its 50-day moving average of 33.5. cboe.com/VXAZN

VIX methodology for Google (VXGOG) down 1.6% to 24.60, compared to its 50-day moving average of 24.56. cboe.com/VXGOG

VIX methodology for IBM (VXIBM) down 1.5% to 22.13, compared its 50-day moving average of 19.32.  cboe.com/VXIBM

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) down 1.35% to 5.35; 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Interest Rate 5 Year Note (FVX) is recently up 40c to 16.99.

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) down 1.81% to 28.65, WTI trades $55.63 cboe.com/micro/VIXETF/VXXLE/

CBOE Crude Oil Volatility Index (OVX) up 2.2% to 56.04, WTI oil trades $56 cboe.com/OVX

Active options at CBOE: AAPL TSLA TWTR AMZN FB

Options with increasing volume @ CBOE: APOL NYRT NSM FSL INFA NWBO MET LRCX NBL

CBOE Volatility Index (VIX) is recently down 56c to 14.69; January 21 and 26 calls are active on total volume of 89K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures (VXX) is recently up 6c to 28,56
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Review of Volatility in 2014 (Part 1) – High Volatility and Record Volume in October

Dec. 22, 2014 – Looking back on volatility in 2014, certainly October was a key month for U.S. stock-related volatility. Two key volatility indexes that hit their highest daily closes for the year on October 15th – the CBOE Volatility Index® (VIX®) closed at 26.25 and the CBOE Short-Term Volatility Index (VXST) closed at 31.32 that day.

RECORD VOLUME IN OCTOBER

Here are record average daily volume (A.D.V.) numbers for October – (1) the S&P 500® (SPX) options A.D.V. rose to all-time record of 1,306,801 (up 58% over the previous month), and (2) VIX options A.D.V. rose to 852,402 (up 53% over previous month).

FIVE ALIGNED CHARTS ON VOLATILITY INDEXES AND VOLUME

Below are 5 charts with the x-axes aligned so you can compare and contrast the data. Is more volatility related to more index options and VIX futures volume?

1 - 3 VIX  & Volume

4-5 - SKEW VVIX

HAS VIX BEEN HIGH OR LOW IN 2014? More

Blogging Options: CBOE Morning Update 12.23.14

US Stocks firmed in early trade after the Q3 GDP Final was revised higher to +5.0%.  Tempering the euphoria was November Durable Goods at -0.7% missing by mile (up 2.4% expected), X-Transports fell 0.4%, X-Defense dropped 0.1%.  Oil up 1.5%, European shares firm.  10-year 2.18%.  Volatility as an asset class:

Chesapeake Energy (CHK) is up $0.84 to $19.26 in the premarket after announcing a $1B stock repurchase authorization. Overall option implied volatility of 51 compares to its 26-week average of 44.

TripAdvisor (TRIP) is higher by $1.02 to $77.89 after being fined for misleading reviews in Italy. Overall option implied volatility of 35 compares to its 26-week average of 39.

Steelcase (SCS) is flat at $17,80 in the premarket after reporting inline Q3 results and sees Q4 4EPS 19c-23c, consensus 20c January call option implied volatility is at 39, April is 31, May is at 30; compared to its 26-week average of 32.

Options expected to be active at CBOE: CVX XOM BP USO UNG XLE GLD DAL LUV SCS

CBOE S&P 500 PutWrite Index (PUT) at 1460.04, 50-day moving average is 1433.29 www.cboe.com/PUT

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 5.44, 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Crude Oil Volatility Index (OVX) at 54.84, compared to its 50-day moving average of 36.22, WTI Crude oil trades below $56  cboe.com/OVX

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Christmas Holiday Trading Hours for CBOE, C2 & CFE

This Thursday is Christmas Day, an exchange holiday.  There will be no trading at CBOE, C2 and the CFE.

Wednesday December 24th is a shortened trading schedule.  On CBOE and C2, options on stocks (equities), Indexes and ETF’s that normally cease trading at 3:00pm Central time will close at 12:00pm noon.  ETF’s and Indexes that normally close at 3:15 CT will close at 12:15pm.

CBOE and C2 will have regular trading hours in all products Friday December 26th.

CFE has a staggered close Wednesday:

Products Closing at 12:00 p.m.
CBOE Gold ETF Volatility Index security futures (GV)
CBOE Crude Oil ETF Volatility Index security futures (OV)
CBOE Brazil ETF Volatility Index security futures (VXEW)

12:12 p.m. CT – Early close (VXT)

12:15 p.m. CT – Early close (VA, VM, VN, VU, VX, VXEM, VXTY)

There will be no extended trading hours on calendar day Wednesday, December 24, 2014 for Business Day Friday, December 26, 2014 in VIX futures.

Trading in VIX futures will be closed from 12:15 p.m. on December 24, 2014 until 5:00 p.m. on December 25, 2014.

CFE will have regular trading hours on Friday, December 26th.
Have a good trading week and a nice holiday.

Weekly Market Commentary 12.19.14

In nearly 45 years of trading, I don’t think I’ve ever seen a market as wild as the one has been this month. Let’s review the entire technical picture. First of all, the chart of $SPX has not yet returned to a bullish state. $SPX would have to trade at new highs (above 2080) in order to turn the chart bullish again. LM 12 19 spx Meanwhile, the equity-only put-call ratios remain on sell signals. They have been racing up their charts, but they still aren’t even halfway up the charts. Thus, they are not in an oversold state.  Since these are 21-day moving averages, they sometimes can’t turn as fast as a market can reverse, but after two strong days in the stock market, they remain on sell signals. Market breadth has turned bullish.  Both breadth oscillators fell into a deeply oversold state when the bulk of the selling occurred early this week.  Then, on the rebound, they have swung over to buy signals. Volatility has been swinging back and forth wildly, as one might suspect.  Compounding this activity, there was a problem with $VIX quotes early in the week, and that resulted in some erroneous $VIX prices.  Regardless, a $VIX spike peak buy signal occurred this week, and that is powerfully bullish (as we have seen). LM 12 19 vix However, the trend of $VIX is actually still upward.  That is, the 20-day moving average is rising and $VIX is at a higher level that it has been for most of the post-October time period.  A rising trend in volatility is bearish for stocks.

In summary, the overall technical picture is mixed.  Some powerful short-term buy signals are in effect.  Also, adding to the bullish is the positive seasonality that now seems ready to take over.  However, there are still some intermediate-term negatives, and until they are overcome, the all-clear will not be sounded for the bulls.

CBOE Mid-Day Update 12.22.14

Volatility as an asset class

Gilead (GILD) option implied volatility has increased after Express Scripts (ESRX) will offer AbbVie’s (ABBV) just approved hepatitis C regimen Viekira Pak.

Gilead is recently down $15.95 to $92.84.  December weekly put option implied volatility is at 55, January is at 41; compared to its 26-week average of 34.

Express Scripts is recently up 93c to $81.91.  January and February call option implied volatility of 19 compared\s to its 26-week average of 20.

AbbVie’s is recently down 32c to $67.43.  January and February call option implied volatility of 28 compares to its 26-week average of 24.

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) down 0.18% to 5.42; 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Interest Rate 5 Year Note (FVX) is recently up 10c to 16.62.

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) up 3.2% to 31.39, WTI trades $55.63 cboe.com/micro/VIXETF/VXXLE/

CBOE Crude Oil Volatility Index (OVX) up 2.2% to 56.04 WTI oil trades $56 cboe.com/OVX

Active options at CBOE: AAPL TSLA TWTR AMZN FB

Options with increasing volume @ CBOE: GILD OCN AA DOW ACHN CVX ARCP NE

CBOE Volatility Index (VIX) is recently down 66c to 15.83; January 18 and 19 calls are active on total volume of 14K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures (VXX) is recently down 5c to 13.72

CBOE S&P 500 Short-Term Volatility Index (VXST) is recently down 89c to 29.01 compared to its 10-day moving average of 18.96 stks.co/r0CS2
More

Blogging Options: CBOE Morning Update 12.22.14

Overseas shares higher, US Dollar up against Euro.  GILD off sharply ($12) as AbbVie gets exclusive on a drug.  Lighter volume on Christmas holiday week begins.  Volatility as an asset class

The ‘Majors’ option implied volatilities has spiked as WTI Crude Oil futures trades $57

Exxon Mobil (XOM) overall option implied volatility of 18 compares to its 26-week average of 18.

BP (BP) overall option implied volatility of 26 compares to its 26-week average of 18.

ConocoPhillips (COP) overall option implied volatility of 31 compares to its 26-week average of 20.

Chevron (CVX) overall option implied volatility of 22 compares to its 26-week average of 18.

Marathon Oil (MRO) overall option implied volatility of 39 compares to its 26-week average of 24.

Options expected to be active at CBOE: HLF CZR BP SNE CHL WAG GILD SPX

CBOE S&P 500 PutWrite Index (PUT) at 1453.14, 50-day moving average is 1428.66 www.cboe.com/PUT

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The Week in VIX – 12/15 – 12/19

The first chart in this blog is a bit out of place. I normally discuss the VXST – VIX – VXV – VXMT term structure in the space where we review volatility index and ETP trading. However, after I completed that blog I considered taking a look at where we closed Friday versus the average for 2014. On the short end VXST is only 0.07 higher than the average for 2014, but this can still be considered relatively high since we are moving into a holiday shortened week. Volatility indexes are calculated based on calendar days and when there are market holidays it creates some downside pressure. This pressure shows up even more in VXST since it is measuring eight day implied volatility.   The rest of the curve is pretty elevated relative to this past year which, if correct in the extra concern, may not be a good sign for stocks in the first half of 2015.

VXST - VIX - VXV - VXMT 2014 Comparison

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The Week in Gold and Oil Volatility – 12/15 through 12/19

Gold volatility represented by GVZ dropped 5% last week and the price of gold as represented by GLD was down 2.25%. Now on to what people care about these days –

The week over week price change for the United States Oil ETF (USO – 21.96) comes nowhere near telling the story from last week. From Friday to Friday USO was up 0.03 from 21.93 to 21.96. So why in the world is the OVX curve in backwardation and why was OVX up over 10% to close over 50.00 for the first time in over 3 years? Why, when I ask rhetorical questions do I automatically think of Aliens?

The reason for elevated OVX has to do with the path USO took last week. Twice last week, Tuesday and again on Thursday, USO was down over 6% for the week. That sort of price action will get traders on edge and that shows up in the term structure chart below.

GVZ OVX

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The Weekly Options News Roundup – 12/19/2014

The Weekly News Roundup is your weekly recap of CBOE features, options industry news and VIX and volatility-related articles from print, broadcast and online and social media outlets.

CBOE’s Index Options Go Global
As announced last week, CBOE has entered into a licensing agreement with MSCI to offer options trading on multiple MSCI Indexes, including the MSCI EAFE Index and MSCI Emerging Markets Index.  CBOE’s MSCI Index options will help asset managers efficiently gain international equity exposure.

“CBOE Partners with MSCI to List Index Options”– Gabriel Surprise, Global Capital
http://bit.ly/1sJtGmQ

“CBOE Gains Exclusivity for MSCI Options” – Helen Bartholomew, International Financing Review
http://bit.ly/1w2ARkr

Merry VIXmas
The market seems to have been a little naughty, becoming more volatile than usual this holiday season.  The VIX Index surged to its highest level since October, making some investors skittish about the markets. Will it be a Merry VIXmas?

“Volatility Update: Early Present For Vol Junkies – Fear Is Back” – JJ Kinahan, Forbes
http://onforb.es/1zzVxVM

“VIX Bets Surge Amid Biggest Stock Swings Since October” – Callie Bost, Bloomberg
http://bloom.bg/1sDvZlB

“Wall Street’s ‘Fear Gauge’ May Not Recede Before Year-End” – Saqub Iqbal Ahmed, Reuters
http://reut.rs/1AuN1ad

“Volatility Spikes: Here’s The Trade that Tames It” – Steven M. Sears, Barron’s
http://on.barrons.com/1x2srAJ

Vol of Vol
While the CBOE Volatility Index is a measure of the S&P 500, the CBOE VIX of VIX Index (VVIX) is a measure of the VIX itself.  So, what exactly is the VVIX telling investors?   “Some see in the sudden ramp in VVIX as a sign that high-yield bonds (selling off for months) and stocks (still near all-time highs) might be about to reconcile their differences…”

“VIX of VIX Near Record: Some Market Observers Are Nervous” – Chris Dieterich, Barron’s
http://on.barrons.com/1C33Fll

“The VIX pop: Bullish On the Margins?” – Adam Warner, Schaeffer’s Investment Research
http://bit.ly/1Gv76kd

New Era For OCC
Amidst a new regulatory environment, OCC sets out on a new course under the leadership of its More

CBOE Mid-Day Update 12.19.14

Volatility as an asset class

CarMax (KMX) is recently up $5.76 to $66.29 on better than expected Q3 results and customer traffic growth. January call option implied volatility is at 28, April is at 31; compared to its 26-week average of 32.

Finish Line (FINL) is recently down $5.63 to $23.28 after lowering its earnings outlook for the year on margin pressures. January call option implied volatility is at 34, February is at 35; compared to its 26-week average of 34.

Xerox (XRX) is recently up 34c to $14.23 after announcing that it will sell its IT outsourcing business to Atos for $1.05B and announced it is lowering guidance. January call option implied volatility is at 22, April is at 24; compared to its 26-week average of 25.

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) down 3.22% to 5.41; 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Interest Rate 5 Year Note (FVX) is recently down 22c to 16.37.

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) down 9% to 32.31, WTI trades $55.63 cboe.com/micro/VIXETF/VXXLE/

CBOE Crude Oil Volatility Index (OVX) down 3.3% to 58.14. cboe.com/OVX

Active options at CBOE: AAPL TSLA TWTR AMZN FB RAD NFLX CIM LNKD GILD VLO

Options with increasing volume @ CBOE: LRCX LF VC CBI RHT OEF TNK PRGO TSO ONVO

CBOE Volatility Index (VIX) is recently down 1.95 to 17.49; January 17 and 25 calls are active on total volume of 442K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures (VXX) is recently down 90c to 30.24
More

Next Week in Weeklys – 12/22/2014

I almost made the title of this blog, This Week in Weekly since there is only one stock with short dated options available for trading that reports earnings during the holiday shortened week next week.  Walgreens (WAG) will report before the market opens on Wednesday.  Over the past three years the biggest gain off earnings has been 5.44% and the biggest drop 5.89%.  The average move for WAG on the trading day following the report has been 3.03% and last quarter the stock only dropped 0.55%.

CBOE Mid-Day Update 12.18.14

Volatility as an asset class

Oracle (ORCL) is recently up $3.40 to $44.56 after Q2 results beat estimates as Q2 total software plus cloud revenue grew 5% to $7.3B. December call option implied volatility is at 26, January is at 21, February is at 19; compared to its 26-week average of 21.

Cloud software-as-a-service, platform-as-a-service and infrastructure-as-a-service stocks have rallied as volatility decreased.

Salesforce.com (CRM) is recently up $2.28 to $59.25. December call option implied volatility is at 28, January is at 31, February is at 30; compared to its 26-week average of 32.

SAP (SAP) is recently up $1.70 to $70.10. January call option implied volatility is at 18, March is at 20; compared to its 26-week average of 21.

Microsoft (MSFT) is recently up $1.29 to $47.03. December call option implied volatility is at 21, January is at 20, March is at 21; compared to its 26-week average of 21.

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 5.59; 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Interest Rate 5 Year Note (FVX) is recently up 51c to 16.63.

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) down 2.9% to 36.68, WTI trades $55.50 cboe.com/micro/VIXETF/VXXLE/

CBOE Crude Oil Volatility Index (OVX) down 3% to 55.14 WTI oil trades $55.50 cboe.com/OVX

Active options at CBOE: AAPL TSLA PBR TWTR AMZN MCD FB RAD NFLX

Options with increasing volume @ CBOE: QSR ROC PIR TOL NYNY OCR RAD

CBOE Volatility Index (VIX) is recently down 1.95 to 17.49; January 17 and 25 calls are active on total volume of 442K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures (VXX) is recently down 90c to 30.24
More

Blogging Options: CBOE Morning Update 12.18.14

Overseas markets rallying overnight (European and Asian shares up 1% to 2%), helping US stock futures add to yesterdays gains.   Options activity brisk yesterday, as CBOE trades 6.7 million of 20.8mm contracts.  SPX with 1.49mm and VIX with 975K led the way. Oil and Ruble up slightly this morning. Volatility as an asset class:

Oracle (ORCL) is up $2.11 to $43.27 in the premarket on Q1 revenue increasing +3.5% compared to year ago on strong cloud growth. December call option implied volatility is at 63, January is at 28, February is at 23; compared to its 26-week average of 21.

Accenture (ACN) is higher by $2 to $87.30 on better than expected Q1 results and strong Q2 net revenue $7.25B-$7.5B, consensus $7.46B. December call option implied volatility is at 60, January is at 29, February is at 20; compared to its 26-week average of 20.

Amgen (AMGN) is up $1.88 to $165.36 in the premarket after raising its Q1 dividend 30% to 79c per share. Overall option implied volatility of 27 is above its 26-week average of 24.

Options expected to be active at CBOE: ORCL AKS JBL AMGN RSX

CBOE S&P 500 PutWrite Index (PUT) at 1420.86; 50-day moving average is 1432.90 www.cboe.com/PUT

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 5.85, 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Crude Oil Volatility Index (OVX) at 56.75, compared to its 50-day moving average of 35.03, WTI Crude oil trades $58. cboe.com/OVX

More

CBOE Mid-Day Update 12.17.14

Volatility as an asset class

Proshares UltraShort Barc 20 Year Treasury ETF (TBT) is recently up 66c to $46.22 into the FOMC policy statement.  December call option implied volatility is at 37, January is at 27, March is at 26; compared to its 26-week average of 24.

IShares Barclay 20+ YR Treasury ETF (TLT) is recently down 93c to $126.68.  Overall option implied volatility of 15 is above its 26-week average of 11.

Whirlpool (WHR) is recently up $9.28 to $183.82 on targeting to double ongoing EPS by 2018.  December call option implied volatility is at 38, January is at 28, March is at 27; compared to its 26-week average of 25.

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 6.21; 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Interest Rate 5 Year Note (FVX) is recently up 43c to 15.69 into Federal Reserve policy meeting decision

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) down 7% to 37.60, WTI above $56 cboe.com/micro/VIXETF/VXXLE/

CBOE Crude Oil Volatility Index (OVX) down 6.8% to 51.93 WTI oil trades above $56 cboe.com/OVX

Active options at CBOE: AAPL C PBR TWTR TSLA AMZN BAC NFLX MCD

Options with increasing volume @ CBOE: WYNN MGM LVS CLF MCD BP

CBOE Volatility Index (VIX) is recently down 1.30 to 22.28; January 20 and 22 calls are active on total volume of 4730K cboe.com/VIX

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Blogging Options: CBOE Morning Update 12.17.14

CPI for November dropped 0.3% due to falling energy prices.  Core Rate (-Food & Energy) rose 1.7%, close to in-line.  Stocks added to early gains after this report.  Fed Minutes later this morning.  Ruble still center-stage today.  Volatility as an asset class

Market-Vector Russia ETF Trust (RSX) is down 12c to $14.26 in the premarket as Russian ruble weakens. Overall option implied volatility of 61 is above its 26-week average of 29.

FedEx (FDX) is off $6.06 to $168.20 after reporting Q2 profit rising less than expeected. December call option implied volatility is at 47, January is at 29, April is at 25; compared to its 26-week average of 22.

Joy Global (JOY) is down $0.95 to $45.10, reporting better than expected Q4 EPS and light 2015 outlook. December call option implied volatility is at 87, January is at 46, April is at 37; compared to its 26-week average of 28.

Options expected to be active at CBOE: RSX DRI FDX JOY GLD VIX

CBOE Interest Rate 5 Year Note (FVX) @ 15.26 into Federal Reserve policy meeting decision

CBOE S&P 500 PutWrite Index (PUT) at 1393.05; 50-day moving average is 1433.46 www.cboe.com/PUT

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 6.44, 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Crude Oil Volatility Index (OVX) at 55.77, compared to its 50-day moving average of 34.40, WTI Crude oil trades $54.
cboe.com/OVX

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CBOE Mid-Day Update 12.16.14

Volatility as an asset class

iPath S&P GSCI Crude Oil Total Return (OIL) is recently up 22c to $13.26 as WTI crude oil trades above $56.  Overall option implied volatility of 60 compares to its 26-week average of 25.

Energy Select Sector SPDR (XLE) is recently up $2.09 to $75.49. December call option implied volatility is at 40, January is 35, March is at 33; compared to its 26-week average of 20.

ProShares Ultra DJ-UBS Crude Oil (UCO) is recently up 26c to $11.39. Overall option implied volatility of 96 compares to its 26-week average of 39.

United States Oil Fund (USO) is recently up 24c to $21.31. Overall option implied volatility of 47 compares to its 26-week average of 21.

Exxon Mobil (XOM) is recently up $1.26 to $88.16. Overall option implied volatility of 26 is above its 26-week average of 17 according to Track Data, suggesting larger price movement.

VIX methodology for Goldman Sachs (VXGS) up 2.7% to 29.79, above its 50-day moving average of 22.74. cboe.com/VXGS

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) down 2.04 to 38.06, WTI above $56 cboe.com/micro/VIXETF/VXXLE/

CBOE Crude Oil Volatility Index (OVX) down 89c to 56.55. cboe.com/OVX

Active options at CBOE: AAPL C PBR TWTR TSLA AMZN BAC NFLX MCD MGM

Options with increasing volume @ CBOE: ARRY BEN GRUB LGCY RUSS LTM CPA PAY TLM IBN

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) up 29c to 6.58; 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Volatility Index (VIX) is recently up 86c to 21.28; December 20 and 23 calls are active on total volume of 720K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures (VXX) is recently down 43c to 32.63
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Blogging Options: CBOE Morning Update 12.16.14

Busy day yesterday as 19.8 million option contracts trade, with CBOE & C2 accounting for 7.2m.  SPX with 1.28m & VIX with 849K.  VIX Futures showed 417K contracts changing hands.  SPY active with 3.7m contracts trading.  VIX traded up to ~24 intra-day yesterday.  After the close Russia raised rates from 10.5% to 17%, 6th raise of ’14.  Ruble trading near 74, range overnight 60-80.  Russia Q3 growth 0.2% (Oil & vodka main exports?). Oil down again, investors looking at longer term charts looking for support levels.   Volatility as an asset class:

Market-Vector Russia ETF Trust (RSX) is down $0.92 to $13 in the premarket as Ruble value collapses to a record low. Overall option implied volatility of 61 is above its 26-week average of 29.

Boeing (BA) is up $1.42 to $123.50 in the premarket after raises its dividend 25% and authorizes a $12B share repurchase plan. Overall option implied volatility of 23 is near its 26-week average of 22.

3M Company (MMM) closed at $156.85 and indicated slightly higher into raising its Q1 dividend by 20% to $1.03 per share. December call option implied volatility is at 22, January and April is at 17; compared to its 26-week average of 17.

Options expected to be active @ CBOE: RSX VIP CTCM MTL YNDX MBT VIP EWG

CBOE S&P 500 PutWrite Index (PUT) at 1404.44; 50-day MA 1435.02 www.cboe.com/PUT

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 7.24, 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Crude Oil Volatility Index (OVX) at 57.55, compared to its 50-day moving average of 33.78, WTI Crude oil trades below $55. cboe.com/OVX

CBOE S&P 500 Skew Index (SKEW) at 135.12, compares to its 50-day moving average of 128.38. SKEW measures the purchase of out-of-the-money S&P 500 Index puts that require a very large downside move to profit from long put positions. An increase of this index indicates greater expectations for an extreme down move.

CBOE S&P 500 BuyWrite Index (BXM) at 1037.55 compared to its 10-day moving average of 1061.09 cboe.com/bxm

CBOE DJIA BuyWrite Index (BXD) at 254.75 compared to its 50-day moving average of 261.14 cboe.com/micro/bxd/

‏CBOE Nasdaq-100 Volatility Index (VXN) at 22.08; compared to its 50-day moving average of 17.64.

CBOE 3-Month Volatility Index (VXV) at 21.06, compared to its 50-day moving average of 17.48 cboe.com/VXV

CBOE S&P 500 Short-Term Volatility Index (VXST) at 21.16, compared to its 10-day moving average of 15.86 VXST is a market-based gauge of expectations of 9-day stks.co/r0CS2

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Capitulation Or Acceleration? – Weekly Market Outlook

Stocks toyed with the idea two weeks ago, but pulled the trigger last week.  What’s that?  A significant stumble.  After the bullish momentum slowed the first full week back after Thanksgiving, it reversed – in spades.  The S&P 500’s (SPY) (SPX) 3.5% pullback last week was actually the worst single calendar-week performance since August of 2011.

Ironically, the sheer size of the selloff may also be the best thing going for the market this week, as it may inspire a short-term bounce.  The market also halted Friday’s pullback at a spot where the bulls have a good chance at making a successful stand.  The details are discussed below, following an inspection of last week’s and this week’s key  economic numbers.

Economic Data

Economic data was relatively sparse last week.  In fact, the only heavy-hitting information we got was November’s retail sales growth.  It was encouraging.  Last month’s overall retail consumption was up 0.7%, and even when taking automobiles out of the picture, November’s retail sales were up 0.5%.  Both figures were considerably better than expected.  Perhaps more important at this time, as the plot of the broad retail spending trend below continues to suggest, the consumer is feeling just fine – spending remains healthy. [The month-to-month volatility is normal.]

It’s not as important as the strength in retail spending for November, but it is likely to be an omen of what to expect when we hear this week’s consumer inflation data.

On Friday, the Bureau of Labor Statistics  reported another slide in producer costs.  The Producer Price Index fell 0.2% overall, and was flat on a core (ex-food and energy) basis.  The annualized PPI rate fell from October’s 1.5% to 1.4%.   Last month’s consumer price index data will be announced on Wednesday, and should be similar tepid.  The problem is, the annualized consumer inflation rate now stands at a rather low 1.66%.  There’s not much room for even-weaker inflation before structural problems surface for the economy.

Everything else is on the following table/calendar:

Economic Calendar
PH 121414-econ-data
Source:  Briefing.com
 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Blogging Options: CBOE Mid-Day 12.15.14

Wild ride today as the DJIA was up and then down 100 points within the first 90 minutes of trading.  Over 16 million option contracts trade in the first five hours.  1 million+ SPX contracts and 700K VIX option contracts, with 308K VIX futures changing hands.   Volatility as an asset class

iPath S&P GSCI Crude Oil Total Return (OIL) is down 0.50 to $13.20 as WTI crude oil trades below $57.  Overall option implied volatility of 60 compares to its 26-week average of 25.

Energy Select Sector SPDR (XLE) is off 0.40 to $73.61. December call option implied volatility is at 47, January is 38, March is at 33; compared to its 26-week average of 20.

ProShares Ultra DJ-UBS Crude Oil (UCO) is recently down 0.80 to $11.31.   Overall option implied volatility of 90 compares to its 26-week average of 38.

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) up 1.5% to 40, WTI below $57 cboe.com/micro/VIXETF/VXXLE/

CBOE Crude Oil Volatility Index (OVX) up 13.5% to 56.55 WTI oil trades below $57 cboe.com/OVX

Active options at CBOE: AAPL C PBR TWTR TSLA AMZN BAC NFLX ABX VIX SPX

Options with increasing volume @ CBOE: RVBD AGCO FRO CRUS UBNT LH PAY PETM OREX KOS

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Blogging Options: CBOE Morning Update 12.15.14

Oil market regains footing and stocks react positively.  Stock futures up nicely but off the highs, after Empire Fed report showed first contraction in the last two years in manufacturing.  Asian shares lower, Europe mixed to higher.  10-year 2.11%.  Dollar strong.  25 K VIX Futures trade this morning in early session, after 500 K Friday.  Volatility as an asset class:

Honeywell (HON) is up $0.72 to $96.70 in the premarket after saying “We expect 2015 to be another strong year for Honeywell with across the board growth in sales, margin, EPS, and free cash flow.” December call option implied volatility is at 28, January and March is at 22; compared to its 26-week average of 18.

Exxon Mobil (XOM) is up $1 to $87.60 as shares rebound from 14-month lows as WIT oil stabilizes at $58 and an upgrade. Overall option implied volatility of 27 is above its 26-week average of 15.

PetSmart (PETM) is up $3.58 to $81.25 in the premarket after being acquired by a consortium led by BC Partners for $83 per share in cash. Overall option implied volatility of 27 compares to its 26-week average of 25.

Options expected to be active @ CBOE: PETM JOY FDX BBRY ORCL VIX

CBOE Equity Options Volume 1,086,847 calls, 885,211 puts CBOE.com

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 6.61, 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Crude Oil Volatility Index (OVX) at 49.77, compared to its 50-day moving average of 33.11, WTI Crude oil trades below $58. cboe.com/OVX

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Last Week in VIX – 12/8 – 12/12

Nothing like a 3% drop to provide a year-end boost to VIX, especially when it appeared no one was expecting it. Last Friday we got through the employment report unscathed and the result was a VIX close under 12. The last potential big “known unknown” this year comes Wednesday afternoon with the FOMC announcement. As a friendly reminder, December VIX futures and options settle on the open Wednesday so any trades based on an FOMC announcement reaction should focus on January contracts.

The curve went from textbook contango to backwardation (when looking at the index and front two month futures). Do note that the farther dated contracts were up over 10% across the board last week. This shows there is a shift in longer term thinking about the health of the US equity markets. So far in 2014 the average closing price for VIX has been around 14. The farther part of the curve indicates the average in 2015 is expected to be higher than in 2014.

VIX Curve

On Wednesday this past week VIX was up 20% on the day rising from 15.35 to 18.53. The December future rose from 14.90 to close at 17.40 that day as well. Someone correctly decided that the upside move was not over and just a few minutes before the 3:15 closing time for VIX options they purchased several (in the 1000’s) VIX Dec 17 Calls at 1.60 and sold the same number of VIX Dec 18 Calls at 1.25 and a net cost of 0.35. With the December future finishing the week at 19.60 and the spot index at 21.08 so far this trade is looking pretty smart.

VIX PO

The Week in Gold and Oil Volatility – 12/8 – 12/12

I recall when I totally ignored Oil in this space for gold, my how things have changed.   USO dropped over 12% last week which places the fund down about 38% in 2014. The result for OVX, as seen on the right side below, was a jump of 45% and a move near all-time highs. The front month December future, which settles on the open Wednesday morning, finished the week at a 2.72 point discount to the index, which indicates to me that a quick move down in OVX (and stabilization of oil prices) is not anticipated for early next week. GVZ moved below 20 as everyone paid attention to the oil market.

GVX OVZ Curve More

The Week in Volatility Indexes and ETPs – 12/8 – 12/12

The VXST – VIX – VXV – VXMT curve shift was the most dramatic change I have seen since writing these blogs. Of course VXST is just a little over a year old so there’s not too much history for comparison. I am more intrigued by the right side of the curve with VXV and VXMT in the 20’s. As a reminder VXV is a 3 month version of VIX and VXMT measures 6 month implied volatility. Those two indexes moving above 20 and in line with VIX indicate some real concern for the S&P 500 going into next year.

VXST - VIX - VXV - VXMT Curve

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The Weekly Options News Roundup – 12/12/2014

The Weekly News Roundup is your weekly recap of CBOE features, options industry news and VIX and volatility-related articles from print, broadcast and online and social media outlets.

MSCI Index Options Coming to CBOE

This week, CBOE announced it entered into a licensing agreement with MSCI to offer options trading on several MSCI Indexes.  In the U.S., options on the MSCI Indexes will be solely listed for trading on CBOE.  Options on the MSCI EAFE Index and MSCI Emerging Markets Index, the first two index options to be listed for trading, are expected to launch in the first quarter of 2015, pending regulatory approval.

“Agreement for New Global Risk Management Products” – Matt Moran, CBOE Options Hub

http://www.cboeoptionshub.com/2014/12/10/agreement-new-global-risk-management-products-cboe-options-msci-indexes/?_ga=1.245543556.165378160.1406565218

“CBOE to Offer Options on MSCI Indexes” – Saqib Iqbal Ahmed, Reuters

http://www.reuters.com/article/2014/12/11/cboe-options-msci-idUSL1N0TU1UG20141211

Asset Managers Use of Index Options on the Rise

A recent study by the TABB Group notes that use of equity-index based derivatives is on the rise among asset managers.  Matt Simon, a TABB principal and author of the study noted “if recent volumes during October are any signal of what to expect in 2015, the changes for increased adoption are already taking hold.”

“Asset Managers Turning to Index Derivatives to Mitigate Risk, Says TABB Group” – Leah Cunningham, HedgeWeek

http://www.hedgeweek.com/2014/12/09/214425/asset-managers-turning-index-derivatives-mitigate-risk-says-tabb-group 

VIX Not Quite Ready for the Holidays

So much for the anticipated quiet markets heading into the holidays…  The CBOE Volatility Index (VIX) popped from 13 to 20 this week and the spike from Monday to Thursday was the biggest four-day advance since 2011.

“Skepticism Jumps in Options as VIX Rises 70% in Four Days” – Callie Bost, Joseph Ciolli and Oliver Renick, Bloomberg

http://www.bloomberg.com/news/2014-12-11/skepticism-jumps-in-options-as-vix-rises-70-in-four-days.html

“Analyzing the Unexpected VIX-plosion” – Adam Warner, Schaeffer’s Trading Floor Blog

http://www.schaeffersresearch.com/commentary/content/blogs/analyzing+the+unexpected+vix-plosion/trading_floor_blog.aspx?blogid=123617&utm_source=SM&utm_medium=Link&utm_campaign=Twitter

“Fear Indicator Spikes as Traders Get Skittish” – Alex Rosenberg, CNBC.com

http://www.cnbc.com/id/102257251

Will Volatility Remain “Lower for Longer?” More

Weekly Market Commentary 12.12.14

Various indicators have been turning bearish since mid-November.  But until
this week, $SPX itself had not broken down, and since price is “king,” that
was quite important.  However, now $SPX has broken down, as it has fallen below
support at 2050.  This completes a bearish pattern, and a full-fledged correction
is underway. This could be sharp and short-lived, and since it is taking place
late in the calendar year (when seasonal bullishness occurs), that is probably
the case.  However, it should be respected until buy signals actually occur.

LM 12 12 14  spx

Equity-only put-call ratios rolled over to sell signals about 10
days ago, and those signals remain strongly in place.

Market breadth has been weakening for several weeks, as the
breadth oscillators gave several sell signals which were subsequently
aborted.  But this time, the sell signals took hold, and they remain in force.

CBOE volatility indices have exploded to the upside. $VIX closed above last
week’s highs, and that established an uptrend in $VIX, which is a sell signal for stocks.

LM 12.12.14   vix

In summary, the indicators are negative, and with $SPX falling below support, it has released selling like the breaking of a dam.  It is likely that the correction will be short-lived, but we are not going to trade the long side until buy signals are confirmed.

Blogging Options: CBOE Mid-Day Update 12.12.14

Big option volume day as stock futures trade off today’s lows.  ~13.6m contracts change hands near noon CST, with SPX options (847K) and VIX (922K) being active.  VIX Futures added on to pre-market interest as 306K futures traded.  Crude stocks still getting hit.  Volatility as an asset class:

iPath S&P GSCI Crude Oil Total Return (OIL) is down $0.45 to $13.76 as WTI crude oil trades near $58.  Overall option implied volatility of 41 compares to its 26-week average of 25.

Energy Select Sector SPDR (XLE) rallied $0.85 off its lows and stood at $74.94, off $0.51.  December call option implied volatility is at 40, January is 36, March is at 31; compared to its 26-week average of 20.

ProShares Ultra DJ-UBS Crude Oil (UCO) is recently down $0.78 to $12.14. Overall option implied volatility of 76 compares to its 26-week average of 37.

CBOE Gold Volatility Index (GVZ) up 1.1% to 19.26, GLD down 5c to $117.62 cboe.com/GVZ

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) down 7.4% to 33.62, WTI @ $61 cboe.com/micro/VIXETF/VXXLE/

CBOE Crude Oil Volatility Index (OVX) +12% to $50.71, WTI oil trades below $59 cboe.com/OVX

Active options at CBOE: AAPL NFLX PBR AMZN PBR NFLX C TSLA TWTR VIX SPX SPY

Options with increasing volume @ CBOE: CY CWB DYN WIN SAVE XDE PDLI CP HUN MHK SSTK

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) up 70c to 6.58; 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Volatility Index (VIX) is recently up 0.62 to 20.70 after a short trip above 21; December 20 and 25 calls are active on total volume of 724K cboe.com/VIX

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Blogging Options: CBOE Morning Update 12.12.14

November PPI fell 0.2% (gasoline accounted for over half of the drop – flat expected) Core Rate was flat.  Oil being hammered again ON IEA lowering oil price forecast again.  Overseas markets down sharply, US following.  Jan WTI trading $58.50.  10-year near 2.12%. VIX Futures active in pre-market with 59K contracts traded.  Volatility as an asset class:

Adobe (ADBE) is up $4.17 to $73.90 in the premarket after reporting first quarter results and that it will acquire Fotolia for approximately $800M in cash. December call option implied volatility is at 45, January is at 31, April is at 28; compared to its 26-week average of 29.

SeaWorld (SEAS) is up $021 to $16.30  after announcing a restructuring program, job cuts and Chairman David D’Alessandro named Interim CEO. Overall option implied volatility of 39 is near its 26-week average of 38.

United Technologies (UTX) is down $2.00 to $112.05 in the premarket after providing fiscal 2014 and fiscal 2015 guidance. December call option implied volatility is at 22, January is at 19; compared to its 26-week average of 18.

Options expected to be active @ CBOE: ADBE UTX XLE USO UNG XLE XOM UCO OIL.

CBOE Equity Options Volume 928,958 calls, 664,359 puts, 1,593,317 total CBOE.com

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 5.88, 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Crude Oil Volatility Index (OVX) at 44.95, compared to its 50-day moving average of 32.53, WTI Crude oil trades below $60. cboe.com/OVX

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Weekly Weekly’s Option Report 12.11.14

Volatility is shaking up the market and traders are loving the fast-pace of trades in the Weekly’s.  I’m Angela Miles. Today I am covering Weekly options expiring this Friday.  Next Friday is a traditional options expiration.

I’m starting with trades in the SPX. It’s a big volume day for SPX (S&P 500 Index) options contracts as the market responds to better-than-expect news on retail sales. One of the more predominate plays is at the 2,020 put strike going into Friday’s expiration. Implied volatility is relatively high at 25 implying this market still has a case of the jitters. On the call side, it’s mostly at-the-money call buying (2045 strike).

The Russell has a buying binge going on. Traders are setting up call positions at the 116 & 117 strikes. Put action is light.

Tesla shares have been mostly rolling lower this week, but today  the stock is driving $3 higher to $213. Traders are jumping on the rally with call buying in the Weeklys at the 212 and 217 strikes. There appears to be some hedgers in traditional options in TSLA as 200, 205 and 210 put players move into the options market.

Lululemon reported earnings that included positive comments about online sales, which could be a plus going into the holiday season. The options straddle predicted up to a 10% move and indeed LULU is rallying about 10% higher today. Traders are counting on the stock stretching to new levels. The weekly calls are moving at the 50, 51.5, 52 and 53. Some of those call buyers may be shorts scrambling as LULU breaks out.  Also in the Weeklys for this week, put players are buying options contracts at the 49 strike. And, someone in the traditional paper wants the 47 puts. Going out into January 52 calls are active. Perhaps it will be a happy holiday season for Lululemon athletic wear lovers.
A report says EBAY is considering massive job cuts next year and the stock is up a $1 to $56. The options are just getting started with 56 call buyers.

Amazon is active. As AMZN trades $307, call players are stepping into the 307, 315 and 320 call strikes, There is a smattering of put paper in the Weeklys at the 300 line.  Feel free to check out my In The Money Show for trader Tim Biggam’s Amazon strategy.

Next Friday, Blackberry turns in earnings. Traders are already building positions on the put side at the 9.5 and 10 strikes.

And, before I take off there is one name to mention that is added to the list of available Weeklys: Talsman Energy.

That’s it for now. Follow me on Twitter @AngieMiles

Blogging Options: CBOE Morning Update 12.11.14

Retail Sales rose this morning, aided by Auto Sales (+1.7%).  Overseas markets not doing as well, talk of more problems in Greece hurting Asian stocks.  OIL off an additional 1%.  Volatility as an asset class

The ‘Majors’ option implied volatility is elevated as WTI Crude Oil futures trade below $62

Exxon Mobil (XOM)  option implied volatility of 24 compares to its 26-week average of 18.

BP (BP) overall option implied volatility of 28 compares to its 26-week average of 17.

ConocoPhillips (COP) option implied volatility of 43 compares to its 26-week average of 19.

Chevron (CVX) overall option implied volatility of 29 compares to its 26-week average of 17.

Total (TOT) overall option implied volatility of 26 compares to its 26-week average of 18.

Eni SpA (E) overall option implied volatility of 42 compares to its 26-week average of 25.

Options expected to be active @ CBOE: LULU CIEN RH AET ATHN XOM CVX SPX IWM

CBOE Equity Options Volume 1,002,145 calls, 743,328 puts, 1,745,473 total CBOE.com

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 5.49, 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Crude Oil Volatility Index (OVX) at 42.21, compared to its 50-day moving average of 32.13, WTI Crude oil trades below $62. cboe.com/OVX

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Next Week in Weeklys – 12/15/2014

*Graphic corrected to show NAV reporting Tuesday before the open.

The year is quickly coming to an end, but there are still a handful of opportunities to trade earnings reports.  Things don’t get started next week until Wednesday before the open with FedEx (FDX).  All numbers below are based on the last 12 quarters earnings history with the Abs Avg representing the  average move off earnings without taking direction into consideration.

Weekly Corrected

Agreement for New Global Risk Management Products — CBOE Options on MSCI Indexes

On December 10 CBOE Holdings, Inc. announced that it has entered into a licensing agreement with MSCI Inc., a leading provider of investment decision support tools worldwide, to offer options trading on several MSCI indexes.  Under the agreement, in the U.S., options on the MSCI indexes will be solely listed for trading on the Chicago Board Options Exchange (CBOE). The six indexes included in the agreement are the MSCI EAFE Index, MSCI Emerging Markets Index, MSCI ACWI Index, MSCI USA Index, MSCI World Index and the MSCI ACWI ex-USA Index. CBOE plans to offer options trading in the first quarter of 2015, pending regulatory approval, on two of MSCI’s best-known indexes: the MSCI EAFE Index and the MSCI Emerging Markets Index.

THE MSCI EAFE INDEX and MSCI EMERGING MARKETS INDEX

The MSCI EAFE Index is recognized as the pre-eminent benchmark in the United States to measure international equity performance. It captures large- and mid-cap representation, and comprises the MSCI country indexes that represent developed markets outside of North America: Europe, Australasia and the Far East.  The MSCI EAFE Index is calculated in U.S. dollars on a real-time basis, and values are disseminated every 60 seconds during market trading hours. At the end of November 2014 the MSCI EAFE Index had these features –

  • 908 constituent stocks;
  • the three largest stocks in terms of market capitalization were Nestle (1.88% of index), Novartis (1.73%), and Roche Holding Genuss (1.64%);
  • companies from the United Kingdom and Japan accounted for more than 41% of the country weightings in the index (see the pie chart).

mm111-Country Weights EAFE & Emerging Mkts

The MSCI Emerging Markets Index captures large- and mid-cap representation across 23 emerging markets countries, and the index covers approximately 85% of the free-float-adjusted market capitalization in each country. At the end of November 2014 the MSCI Emerging Markets Index had these features –

  • had 833 constituent stocks,
  • the three largest stocks in terms of market capitalization were Samsung Electronics (3.22%), Taiwan Semiconductor Mfg. (2.82%), and Tencent Holdings (2.06%), and
  • companies from China accounted for more than 20% of the country weightings in the index (see pie chart).

VOLATILITY AND THE MSCI INDEXES More

CBOE Mid-Day Update 12.10.14

Volatility as an asset class

Las Vegas Sands (LVS) is recently down $1.94 to $54.17 after FBR lowered its estimates for LVS, Wynn Resorts (WYNN) and MGM Resorts (MGM) citing the 20% decline in Macau gross gaming revenue in November and a “soft” first week of December.  December call option implied volatility is at 36, January is at 32; compared to its 26-week average of 28.

Wynn Resorts (WYNN) is recently down $8.15 to $148.49. December weekly call option implied volatility is at 42, December is at 35, January is at 31; compared to its 26-week average of 30.

MGM Resorts (MGM) is recently down 73c to $20.78. December weekly call option implied volatility is at 33, December is at 38, January is at 32; compared to its 26-week average of 28.

CBOE Crude Oil Volatility Index (OVX) up 11.4% to 41.85, WTI crude oil trades below $61. cboe.com/OVX

CBOE Gold Volatility Index (GVZ) down 3% to 19.44, GLD down14c to $118.05 cboe.com/GVZ

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) up 11% to 34.94, WTI @ $61 cboe.com/micro/VIXETF/VXXLE/

Active options at CBOE: AAPL C BAC VZ TSLA TWTR AA DOW BAC ODP CVX MRK NFLX RIG

Options with increasing volume @ CBOE: GMCR FSLR MRK VZ GGP S XOM WFT

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) up 16c to 5.16; 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Volatility Index (VIX) is recently up 1.27 to 16.16; December 16 and 18 calls are active on total volume of 318K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures ETN (VXX) is recently up 1.04 to 28.49
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Blogging Options: CBOE Morning Update 12.10.14

Economic news overseas not great this morning, but overseas markets steady (Asia mixed, Europe fractionally higher) after yesterday’s selloff.  Metals lower, 10-year 2.22%.  Chicago baseball fans prepare for subway series after signing pitchers.  Volatility as an asset class:

Costco (COST) is up $1.50 to $144.54 in the premarket after reporting better than expected Q1 EPS of $1.12 and Q1 SSS up 5%.  December call option implied volatility is at 16, January is at 15, April is at 14; compared to its 26-week average of 16.

Yum! Brands (YUM) is down $3.62 to $71.60, after saying its sees 10% EPS growth in 2015. Overall option implied volatility of 33 compares to its 26-week average of 23.

United States Oil Fund (USO) is down $0.55 to $23.65 in the premarket as WTI oil trades below $63. December weekly call option implied volatility is at 40, December and January is at 36; compared to its 26-week average of 22.

VIX methodology for iShares Trust FTSE China 25 Index Fund (VXFXI) @ 28.64, compared to its 50-day MA is 24.76 as FXI moves up 32c to $40.61.

Options expected to be active @ CBOE: COST TOL KKD TITN USO XLE YUM

CBOE Equity Options Volume 996,670 calls, 774,691 puts, 1,771,361 total CBOE.com

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 5, 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Crude Oil Volatility Index (OVX) at 37.66, compared to its 50-day moving average of 31.46, WTI Crude oil trades below $63. cboe.com/OVX

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CBOE Mid-Day Update 12.9.14

Volatility as an asset class

Bank of America (BAC) is recently down 32c to $17.34 on the bank sees Q4 sales and trading revenue down linked-quarter, y/y. December call option implied volatility is at 19, January and February is at 20; compared to its 26-week average of 23.

Citigroup (C) is recently down $1.19 TO $55.19 on the CEO sees $2.7B charges in Q4 to address legal reserve charges. December call option implied volatility is at 20, January is at 18, February is at 20; compared to its 26-week average of 21.

Burlington Stores (BURL) is recently up $1.43 to $44.28 after beating Q3 estimates, raising FY14 outlook. December call option implied volatility is at 38, January is at 31, March is at 35; compared to its 26-week average of 45.

CBOE Crude Oil Volatility Index (OVX) down 2.5% to 38.69, WTI crude oil trades $65. cboe.com/OVX

CBOE Gold Volatility Index (GVZ) up 2.7% to 20.15, GLD up 2% to $118.17 cboe.com/GVZ

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) up 9.1% to 29.99, WTI @ $64 cboe.com/micro/VIXETF/VXXLE/

Active options at CBOE: AAPL C BAC VZ TSLA TWTR AA DOW BAC PBR KO

Options with increasing volume @ CBOE: CONN CBST SAVE HAIN

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) at 5.05; 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Volatility Index (VIX) is recently up 1.80 to 16; December 20 calls and December 13 puts are active on total volume of 317K cboe.com/VIX

iPath S&P 500 VIX Short-Term Futures ETN (VXX) is recently up 1.40 to 28.45
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Index & ETF LEAPS To Be Added for 2017

On Wednesday, December 24, 2014, trading begins for December 2017 LEAPS® in the below Index and exchange-traded fund (ETF) option products:

DJX (Dow Jones Industrial Average)
MNX (Mini-NASDAQ 100 Index)
NDX (NASDAQ 100 Index)
OEF (iShares on the S&P 100 Index Fund)
OEX (S&P 100 Index with American Exercise)
RUT (Russell 2000 Index)**
SPX (S&P 500 Index)
SPY (SPDR S&P 500 ETF Trust)**
XEO (S&P 100 Index with European Exercise)

** Note: RUT and SPY are the only products identified in the above list which trades on both CBOE and C2. All of the other products are listed for trading only on CBOE.

A notice listing the new LEAPS series (strike prices) will be issued during the week of December 15, 2014.

Additionally, notice listings for CBOE and C2 2017 LEAPS can be found by accessing the below hyperlinks during the distribution week mentioned above.

CBOE:
http://www.cboe.com/tradtool/DailyNewListings.aspx
C2:
http://www.c2exchange.com/Trading/C2DailyNewSeriesOnline.aspx

Blogging Options: CBOE Morning Update 12.9.14

Greek shares off over 10% (bailout talks faltering and elections announced), Chinese shares in Shanghai lower by ~6% (tightened collateral rules) have US stock futures on edge.  European shares off ~1.5%, Gold higher, 10-year 2.23%.  Over 20 K VIX Futures trade in early session this morning.   JOLTS at 9am CDT. TMUS with interesting Convertible Preferred announced after the close. Volatility as an asset class

VIX methodology for iShares Trust FTSE China 25 Index Fund (VXFXI) at 28.47, compared to its 50-day MA is 24.71 as FXI sells off 2.9%.

Verizon (VZ) is down $1.25 to $47.65 in the premarket after reporting that it expects Q4 impacts of promotional offers will pressure wireless EBITDA and EPS. Overall option implied volatility of 15 is  at its 26-week average.

AutoZone (AZO) is up $17.96 to $599.01 in the after reporting Q1 EPS $7.27, compared to consensus $7.16. December call option implied volatility at 22, January and March is at 17; compared to its 26-week average of 19.

Diamond Foods (DMND) is up $0.29 to $29.30 in the premarket after reporting better than expected Q1 EPS and backed FY15 EPS view 90c-$1.10, consensus $1.03. December call option implied volatility is at 62, January is at 44, March is at 39; compared to its 26-week average of 38.

Options expected to be active @ CBOE: DMND AAPL MW KKD AZO COST HRB PBY TMUS BXP CBST

CBOE Equity Options Volume 1,240,062 calls, 764,250 puts, 2,004,312 total CBOE.com

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 4.82, 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Crude Oil Volatility Index (OVX) at 39.68, compared to its 50-day moving average of 31.36, WTI Crude oil trades below $65. cboe.com/OVX

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Skipping Around: Of Jobs, Oil and Markets

Today, we’ll take a look at how jobs, oil and market volatility are playing a role in the market environment.

A Solid Jobs Report:  But You Can’t Please Everyone

Last week’s job number took many by surprise.  What a great report it was, 321K jobs created based on the latest survey, previous reports revised upward.  Yet, all I heard were complaints – the jobs created were temporary, not high-paying career type positions and that this will turn tail in a couple of months.  I disagree with all of this noise.  First, any job creation is great for the economy, and those who have been sitting around waiting for a job are finally getting their chance.

To me, it doesn’t really matter the quality of the job – just that companies are hiring is a GREAT sign!  There have been so many unemployed for so long that they have mostly been forgotten.  More jobs, more income, more spending, broader tax base.  It’s all good.  This jobs report is indicative of an economy growing at a moderate pace which can continue for the next three to five quarters at least.

Oil is Gushing Out of Control

Many were shocked and surprised after the OPEC meeting and the ministers decided not to cut production of crude.  While the drop in price has been substantial over the past four months, the trend was pretty clear by looking at the chart.  Bearish sentiment has also been seen with an increase of put options bought in the futures market.  OPEC controls supply but does not control demand, and therein lies the issue.

Demand for crude has not expanded to absorb the supply on the markets and hence prices fall.  At some point the market will find a balance.  Much of the speculation about companies’ health and spending in the years ahead is just guessing and trying to jump ahead.  Stay away from the noise and just pay attention to what the market is telling you.

No Fear According to the VIX

With the VIX indicator sitting just under 12% it is understood that market players are showing complacency.  That might be ‘normal’ at a time when holiday cheer is being spread around but extremes are something we need to guard against.  Remember the opposite in mid-October, when fear was rising and hit a point of ‘I can’t take it anymore’?  At the time markets had corrected nearly 10% in  short month, volatility hit more than 30% but subsequently collapsed to where we are at today.

There are reasons for a rise in fear, an overbought market may be just one of them.  Recently it was the ebola crisis, which thankfully has dissipated.  But the pain left on the airlines and travel business was real, more than 30% declines in stock values – but when that disappeared and lower oil prices (see above) hit then these stocks started to gain some footing and are at/near highs again.

Right NOW would be a good time to lighten up on long portfolios, perhaps even buy some cheap protection via SPY, QQQ, or IWM puts.  But have an understanding of what the purpose is of that protection or insurance.   Every time we have seen volatility spike lower to this area there has always been a whack coming.  As Pete Najarian from Optionmonster said on CNBC’s Fast Money Friday, ‘expect to lose money on this‘, that is if you are protecting a long portfolio.  Bob Lang, Senior Market Strategist, and editor of Explosive Options.

CBOE Mid-Day Update 12.8.14

Volatility as an asset class

Large Cap oil Services Company’s volatility is elevated as WTI Crude oil trades near $65

Baker Hughes (BHI) overall option implied volatility of 34 compares to its 26-week average of 28.

Dril-Quip (DRQ) overall option implied volatility of 35 compares to its 26-week average of 29.

Halliburton (HAL) overall option implied volatility of 40 compares to its 26-week average of 29.
_DSC0115
National Oilwell (NOV) overall option implied volatility of 30 compares to its 26-week average of 26.

Schlumberger (SLB) overall option implied volatility of 32 compares to its 26-week average of 25.

Weatherford (WFT) overall option implied volatility of 54 compares to its 26-week average of 38.

CBOE Crude Oil Volatility Index (OVX) up 12.9% to 38.60, WTI crude oil trades $65. cboe.com/OVX

CBOE Volatility Index-VIX methodology for Energy Select Sector SPDR (VXXLE) up 9.1% to 29.99, WTI @ $65
cboe.com/micro/VIXETF/VXXLE/

Active options at CBOE: AAPL C BAC AMZN GILD TSLA TWTR RIG MCD

Options with increasing volume @ CBOE: DWA AMAT COP SUNE CBST DWA

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) at 4.78; 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

VIX methodology for iShares Trust FTSE China 25 Index Fund (VXFXI) -2.6% to 28.52, 50-day MA is 24.71 after sharp FXI rally

CBOE Volatility Index (VIX) is recently up 96c to 12.78; December 15 calls and December 12 puts are active on total volume of 133K cboe.com/VIX
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Can The Nasdaq Comp & Russell 2k Give The Next Boost? – Weekly Market Outlook

Though the market may have gotten off  to a bad start with Monday’s 0.7% stumble, the bulls took charge again the very next day to hammer out a gain for the week.  Granted, it was less than a 0.4% gain when all was said and done, but a gain is a gain.

On the other hand, it didn’t take long after last week’s turnaround from Monday’s dip for the lethargy to set in again (some of which is likely due to the winter holiday season).  Once again, the S&P 500 (SPX) (SPY) is bumping around new-high territory, but failing to clearly move above this area.

We’ll dissect the action and weight the odds, but let’s first set the bigger-picture stage with a look at last week’s major economic news.

Economic Data

There was plenty of economic data in the lineup last week, but all eyes were on Friday’s unemployment data.  The jobs numbers were better than expected, but when you delve in they are perhaps not as good as the headlines implied.

Yes, Bureau of Labor Statistics reported that in November the U.S. economy added (net) 321,000 jobs, more than jiving with the ADP payroll report of 208,000 new jobs being created in November.  So why didn’t the unemployment rate change from 5.8%?  It’s got to do with the way the unemployment is calculated.  The number of people who count themselves as unemployed – but willing and able to work – grew just about as much as the entire labor pool (employed or not) did, resulting in no net change of the proportion of unemployed-to-total-labor-force.  It’s a dubious improvement… more people are working, but more people that would like to have a job are also not working.

The proverbial litmus test continues to be the labor force participation rate and the employment rate of the nation’s population.  The percent of the nation’s inhabitants at work now is 59.2%, up from a low of 58.3% on late-2009, but still well under the peak at 63.3% seen in 2007.  The percent of the population that’s officially in the labor force (working or not) is still at 62.8%, just as tad above the multi-year record low of 62.7% hit in September.  Some, though not all, of that decline can be blamed on the ongoing wave of retirement of the baby-boomers.

On other fronts, the Institute for Supply Management’s data was a mixed bag.  The overall index slumped from 59.0 to 58.7, but the ISM Services Index advanced from 57.1 to 59.3 in November.

The Department of Labor reported a revision to Q3’s productivity rate.  The DOL now says it was up 2.3% in the third quarter, and not the previously suggested 2.0% increase.  Also, factory orders fell 0.7% in October following September’s dip of 0.5%.  Neither is considered hard-hitting data, however.

Economic CalendarPH 12 8 14  120714-econ-data

Source: Briefing.com

Stock Market Index Analysis

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Blogging Options: CBOE Morning Update 12.8.14

US stock futures weak on economic news out of Japan (GDP), Chinese trade data, S&P downgraded Italian debt… and there’s Oil.  Morgan Stanley is said to have cut their oil price base forecast from $98 to $70, and said oil could hit $53 bbl in 2015.  Bond yields off fractionally. European shares lower.  LUV & EBAY upgraded before the opening.  Volatility as an asset class

Cubist Pharmaceuticals (CBST) is up $26.74 to $101.10 in the premarket on Merck (MRK) acquiring for $102 per share in cash.   Overall option implied volatility of 45 is above its 26-week average of 42.

Merck (MRK) is up 16c to $61.65. Overall option implied volatility of 15 compares to its 26-week average of 17.

McDonald’s (MCD) is recently down $2.81 to $93.69 in the premarket after reporting November global comparable sales decreased 2.2%. Overall call option implied volatility of 15 is at its 26-week average of 15.

Options expected to be active @ CBOE: MRK CBST DMND AAPL SDRL MCD

CBOE/CBOT 10-year U.S. Treasury Note Volatility (VXTYN) @ 4.85, 52-week low 1.69, high 14.58 www.cboe.com/vxtyn

CBOE Crude Oil Volatility Index (OVX) at 34.20, compared to its 50-day moving average of 30.06, WTI Crude oil trades below $65. cboe.com/OVX

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The Week in VIX or Part 2 of the Big VIX Option Trade

VIX drifted to close under 12.00 for the first time since late August as the S&P 500 made more new highs. The leftover fear from the market’s dive in October seems to be gone just like all our Thanksgiving leftovers. At least one derivative strategist thinks lower VIX levels are on the near term horizon. Buzz Gregory from Goldman Sachs was featured in Barron’s this weekend saying his models point to VIX around 10.60 before 2014 is done. The trades executed last week and discussed in a previous blog and at the end of this posting match up well with this forecast.

VIX PA More

The Week in VIX Indexes and ETPs – 12/1 – 12/5

With the S&P 500 racking up more record high closes last week volatility indexes dropped to levels expected when there is a strong bull market run combined with a lack of concern regarding a pull back for stock prices. We also got past the employment number, which did have a few traders on edge, without the stock market not visiting lower levels.

VXST - VIX - VXV - VXMT The next big economic event on the horizon is the FOMC Rate Decision coming out the afternoon of December 17th. Any traders concerned about the market impact from the Fed’s last meeting of 2014 would focus on January VIX futures and options since the December contracts actually settle on the morning of the 17th.

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The Weekly Options News Roundup – 12/5/2014

The Weekly News Roundup is your weekly recap of CBOE features, options industry news and VIX and volatility-related articles from print, broadcast and online and social media outlets.      

CBOE.com 2.0
CBOE recently introduced a newly enhanced website that offers easier navigation and search capabilities, updated and revised educational content and a responsive design that optimizes desktop, mobile phone and table viewing.  Check out all its features at http://www.cboe.com/.

“CBOE Revamps Website” – Finextra
http://bit.ly/1CJlPK6

“The VXTYN is a Fear Gauge of Interest Rates”
Last month, CBOE Futures Exchange launched trading of futures on the CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (VXTYN Index), changing the game when it comes to hedging interest rates.  CBOE’s John Angelos discusses some of the mechanics and potential users of this new product.

“Trading Bond Volatility” – Steve Marlin, Markets Media
http://bit.ly/12BZNZU

It’s Beginning to Look a Lot Like VIXmas
The VIX Index seems to be forecasting a calmer market as we approach the holidays.  Hovering around 12, it’s offering investors the gift of lowered volatility.  This sentiment is also echoed by increased activity in VIX put options activity…. but will it really be a Silent Night?

“VIX Shunned as Few Bumps Seen for S&P 500 at Year’s End” – Callie Bost, Bloomberg
http://buswk.co/1yX3C7G

“Should We Fear the Fear Index?” – Abigail Stevenson, CNBC.com
http://cnb.cx/1BhgEzj

“Volatility Goes Into Hibernation” – Ron DeLegge, ThinkAdvisor
http://bit.ly/1vQPive

“Low Volatility Ahead? VIX Put Options See Heightened Activity” – Saumya Vaishampayan, Wall Street Journal
http://on.wsj.com/1yS34iz

One Year Old and Here’s to Many More
In November 2013, CBOE launched futures contracts on the CBOE Russell 2000 Volatility Index (RVX).  Russell Investments’ Pat Fay discusses the rising interest in small cap stocks and the performance of RVX.

VIDEO:  “Small Caps Coming Up Big: Russell’s Pay Fay on the One-Year Anniversary of the CBOE Russell 2000 Volatility Index” – John Lothian News
http://bit.ly/1BhwZnv

Looking for Volatility? Try Gold and Oil  
While volatility in equities has remained subdued, the gold and oil markets have been a very different story.   The CBOE Gold ETF Volatility Index (GVZ) increased 19% over the past week, as turbulence hits the precious metals market, and the CBOE Crude Oil ETF Volatility Index (OVX) has doubled since the beginning of the year.

“Gold ETF Volatility Soars as Dollar, Oil Tame Inflation: Options” – Callie Bost, Bloomberg
http://bloom.bg/1I4vdIt

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