All-time Record Daily Closing Highs Today for BXY, BXM, PUT, BXR, BXN and LOVOL Indexes

Six CBOE strategy benchmark indexes all hit all-time record daily closing highs today (June 22) –

  • 1559.33 BXY – CBOE S&P 500 2% OTM BuyWrite
  • 1527.39 PUT – CBOE S&P 500 PutWrite Index
  • 1140.06 BXM – CBOE S&P 500 BuyWrite Index
  • 459.22                   BXN – CBOE Nasdaq BuyWrite Index
  • 218.42                   BXR – CBOE Russell 2000 BuyWrite Index
  • 185.16                   LOVOL- CBOE Low Volatility Index

All six of these benchmark indexes engage in the systematic selling of index options to collect options premium on a regular basis. mm71mm72


No Progress Since February – Weekly Market Outlook

The market certainly got off on the right foot last week, rallying all the way through Thursday when the NASDAQ Composite (COMP) finally cleared its all-time record high set back in March of 2000. With no other major market index completing the same feat though — in addition to Friday’s pullback somewhat extinguishing the budding rally — we can say right now that once again stocks are caught between a rock and a hard place.

We’ll dissect the details below, right after a quick run-down of last week’s and this week’s important economic news.  

Economic Data

It was a fairly full week last week in terms of economic news, but only two really big ones.

The fireworks started on Tuesday with May’s housing starts and building permits data. It was a mixed message. Starts fell from a pace of 1.165 million to 1.036 million, but permits ramped up from a pace of 1.140 million in April to 1.275 million last month. Either way, both are in long-term uptrends. 

Housing Starts and Building Permits Chart
Source: Thomson Reuters

We also got an updated look at our inflation situation. Overall prices were up 0.4% last month compared to April’s prices, though on a core basis (not counting food or energy) consumer prices were up a mere 0.1%. On an annualized basis, the inflation rate now stands at 0.0%. On a core basis though, our annual inflation rate is a still-tepid 1.7%.

Inflation Chart
Source: Thomson Reuters

And of course, the Federal Reserve told us on Wednesday that though there would be no change to the current Fed funds rate of 0.25%, we could expect one at some point in the foreseeable future. September and December are the regularly scheduled times to make such a change if one (or two) becomes necessary. And, Janet Yellen believes economic growth and the unemployment situation are still both on a track that will prompt a rate hike sooner than later. All the same, Wednesday’s comments from the recent Fed meeting were ambiguous enough to leave all options open. 

Everything else is on the following grid: More

The Week in Russell 2000 Trading – 6/15 – 6/19

Small cap stocks dominated last week as the Russell 2000 (RUT) rose 1.55% and even put up an all-time record close on Thursday. Large cap stocks fared OK with the Russell 1000 (RUI) rising 0.66% last week, but unlike the RUT, RUI did not manage to put in a new all-time closing high. We have almost reached the middle of the year and so far RUT is up 6.64% while RUI has risen 3.05%.

Russell 1000 - 2000

Large cap expected volatility is best represented by the CBOE Volatility Index (VIX) which was a tad higher last week, moving from 13.78 to 13.96, despite the gain in large cap stocks. The CBOE Russell 2000 Volatility Index (RVX) was also a bit higher rising from 16.23 to 16.33. In this space I like to focus on the relationship between these two forward looking volatility measures as an indication of the relative risk perception of owning small cap or large cap stocks. That risk moved down slightly on a week over week basis to remain at pretty low levels relative to recent history.


As the RUT moved to a record high on Friday there were some pretty interesting late day trades. This is not something I would suggest for the faint of heart, but as the day came to an end and RUT was near 1285 there was a seller of Jun 19th 1300 Calls at 0.25 who paid 0.10 for the Jun 19th 1310 Calls for a net credit of 0.15. Remember RUT options are AM settled, even the Weeklys. These trades occurred in the afternoon on the 18th and were held overnight into Russell 2000 Settlement (RLS) on the open Friday, which came in at 1286.11. A move over 1300.15 would have resulted in a loss which could have been capped at 9.85 with RLS coming in 1310 or higher.

The Week in VIX – 6/15 – 6/19

I promise there are two curves on the figure below showing the week over week changes for VIX and the active VIX futures contracts. All were higher with the exception of the December contract which finished the week unchanged. This just increased the ‘divot’ that we see each year with December volatility.

VIX Curve Table Corrected
Trading wise, someone used the Thursday dip in VIX to take a bullish position on volatility using July VIX Options. This trade took the form of buying the VIX Jul 17 Call for 1.10 and selling the VIX Jul 21 Call at 0.65 for a net cost of 0.45 and a potential reward of 3.55 if July VIX settlement comes in at 21.00 or higher.

VIX PO Corrected

The Week in Volatility Indexes and ETPs – 6/15 – 6/19

The S&P 500 rose about 3/4% to finish the week over 2100. The term structure of volatility shifted slightly high last week, despite the gain in the S&P 500. That’s a little perplexing, until you consider the continued potential exit of Greece from the Eurozone which I hear commonly referred to as Grexit, despite some market watchers claiming the markets have grown tired of waiting for the potential Grexit to come to fruition. I have decided to try to coin a new term around this – Gratigue or Greetigue both have a catchy ring to it.



The Weekly Options News Roundup – 6/19/2015

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.

VIX Trading Going Global
The interconnectedness of today’s global markets is underscored by the impact that macroeconomic incidents in one corner of the world have on another.  Volatility doesn’t sleep, and now, neither does trading VIX (and SPX) options.

“CBOE Extends VIX and SPX Options Trading Hours as Global Growth in VIX Continues to Build” – Hedgeweek

“Record Volume Today in ETH Session for VIX Options” – Matt Moran, CBOE Options Hub

VIX Options, Get’em While They’re Hot
As speculation regarding when the Fed will raise interest rates hovers over the market and the Greece default saga drags on, VIX call options have been in demand as traders brace for a potential rise in volatility in the months ahead.

“Is ‘Sharp’ Money Chasing VIX Paper?” – Adam Warner, Schaeffer’s Investment Research

“You Can’t Keep the Panic Out of Stocks Forever, VIX Traders Say” – Callie Bost, Bloomberg

“VIX Investors Feeling Fatigue Following Fed Meeting” – Daniel O’Leary, EQ Derivatives

“Will Fed Show Its Hand, Stir Stocks From Stagnant June?” – JJ Kinahan, Forbes

“In The VIX Complex, It’s Always Groundhog Day” – Todd Salamone, Schaeffer’s Investment Research

Are You Keeping Tabs on the TYVIX Index — the Interest Rate VIX? 
The recent volatility in the bond market has been reflected in the CBOE/CBOT 10-year Treasury Note Volatility Index (TYVIX).

“Bond Trading Makes Quiet Comeback” – John Carney, Wall Street Journal

Additional information on TYVIX Index:

Technological Wheels Keep Turning With CBOE Vector
CBOE’s ability to collaborate, create and connect with the marketplace has created a unique culture of innovation, not only in product development, but also in trading technology.  Last month, Vector — CBOE’s next generation of trading technology — was unveiled for the first time.

“CBOE Sets Sights on Vector” – Market Voice

CBOE and LiveVol Recap
Earlier this month, CBOE announced the acquisition of Livevol, a technological leader in market data services and the trading analytics.   The deal will enable CBOE leverage the synergies between the two companies by customizing Livevol data and analytics to provide customers with greater insight to CBOE’s proprietary index products, including CBOE’s S&P, Russell, MSCI and VIX products.

“CBOE to Acquire Livevol’s Trading Analytics Platforms” – Wall Street Letter

BXR & RUT Indexes Hit All-Time Highs, As Interest in Small-Caps Heats Up


Yesterday (June 18) was a key day for small-cap instruments, as shown by these facts –

  1. The Russell 2000 Index (RUT) (the key gauge of for U.S. small-cap stocks) hit an all-time daily closing high of 1284.68;
  2. The CBOE Russell 2000 BuyWrite Index (BXR) (the key gauge for use of an RUT index options buywrite strategy) hit an all-time daily closing high of on 217.68;
  3. Daily volume for options on the Russell 2000 (RUT) rose to 131,638 contracts, the highest level in recent weeks.



The CBOE Russell 2000 BuyWrite Index (BXR) is a benchmark index that measures the performance of a theoretical portfolio that sells RUT call options against a portfolio of the stocks included in the Russell 2000 Index. While the BXR index hit an all-time record high yesterday, buy-write strategies can do well versus stock indexes in times of sluggish to down equity markets. More

Earnings Next Week – 6/22 – 6/26

Things continue to pick up in the earnings world with five companies reporting next week.  The numbers on the table represent three years of history with Max being the biggest gain, Min being the biggest drop, Abs Avg representing the average move (higher or lower), and Last Q being what the stock did in reaction to earnings three months ago.


Block Trade Analysis – Short VIX Straddle + Long OTM Call

The June 2015 VIX futures and options met their demise on the open yesterday with settlement coming in at 14.67. One trader moved on to the following month with a trade structure that is unique in the option world, but pretty common in VIX world.

Mid-morning on Wednesday a trader sold 22,800 VIX Jul 15 Calls for 1.73 and 22,800 VIX Jul 15 Puts at 1.18 who then completed the trade through purchasing 22,800 VIX Jul 22 Calls at 0.72 for a net credit of 2.19. The payoff at expiration appears below with a brief discussion to follow.



2015 Russell Reconstitution Update

Each June the Russell family of equity indexes are adjusted to reflect changes in the markets.  This annual process is commonly referred to as the Russell Reconstitution.   The Reconstitution occurs once a year in order to keep the cost associated with maintaining an index portfolio at a minimum or specifically to keep trading costs low.

We are now half way through the Russell Reconstitution with two of the four steps behind us.  The almost month long process begins on the last business day of May and ends on the last Friday of June.  This year the last business day of May was the 29th and based on closing prices global companies are ranked by market cap to form the preliminary global reconstitution portfolios.

The second step occurred last Friday June 12th with preliminary index additions and deletions being posted on the Russell Indexes website.  Some highlights from Friday’s posting include that Apple (AAPL) is largest constituent in the Russell 3000 with a market cap of over $750 billion.  This is a rise of over 37% from this time last year.   The total market cap for the Russell 3000 rose by 9% and is now tops $25 trillion dollars.  Finally, the breakpoint for inclusion in the Russell 1000 versus the Russell 2000 is $3.4 billion, up about 10% from the previous year.

The third step comes up this Friday with any updates to the June 12th release being shared after the close on June 19th.  The final step in the reconstitution process occurs on Friday June 26th when the newly reconstituted indexes take effect after the market close.  There will be several crossing trades that occur near the close on the 26th as portfolio managers charged with matching the performance of the Russell 1000, Russell 2000, or Russell 3000 rebalance their portfolios.  Despite about a 10% turnover in the stocks that make up these indexes, the market impact is minimal with the exception of extra volume occurring on the close.

For more on how the Russell 2000 and CBOE Russell 2000 Volatility Indexes behave around the reconstitution process visit

For updates on the Russell Reconstitution process or any other information regarding the family of Russell Indexes visit

Record Volume Today in ETH Session for VIX Options

Yesterday (June 15) the CBOE Volatility Index® (VIX®) rose to its monthly closing high of 15.39, and earlier today in the June 16 Extended Trading Hours (ETH) sessions, the estimated trading volumes during ETH were 30,920 for VIX futures (the high for the month), and 6,984 for VIX options (the all-time record high).   CBOE Holdings is now offering Extended Trading Hours (ETH) on key popular index futures and options contracts in order to provide investors with the ability to take advantage of market opportunities as they happen and to manage portfolios and volatility throughout more trading hours around the clock. MM45


Where We Stand Now – Weekly Market Outlook 6.15.15

Despite Wednesday’s heroically bullish day, Monday’s and Friday’s tumbles were enough to translate into about a breakeven for last week… against a (mostly) bearish backdrop. That is, although the S&P 500 (SPX) (SPY) made a very modest gain last week, it made even bigger losses in each of the prior two weeks, and is still knocking on the door of some very critical support levels.

We’ll have a detailed discussion of those support lines below, after a close examination of last week’s and this week’s key economic numbers.

Economic Data

It wasn’t a terribly busy week last week in terms of economic news, but we did get a couple of interesting data nuggets. 

Perhaps above all else, retail sales grew nicely. They were up 1.2% overall in May, and they grew by 1.0% when taking automobile sales out of the equation. 

Retail Sales Chart
Source:  Thomas Reuters

The only other truly noteworthy economic data we heard last week was May’s producer price inflation. Though still tepid on an annualized basis (on a core as well as a non-core basis), May’s 0.5% uptick was a nice little bump. On the other hand, not counting the cost of food and fuel, producer input costs were only up 0.1%.

Producer Price Inflation Chart
Source:  Thomas Reuters

While still on the low side of the desired range of readings, we can see a little improvement on the inflation front. This week’s consumer inflation figure will be an important indication [more important than producer inflation anyway] of the true inflation picture the Fed is looking at to judge if or when interest rates need to start moving higher.  More

The Week in Russell 2000 Trading – 6/8 – 6/12

Small cap stocks continue the recent domination over large caps with the Russell 2000 outperforming the Russell 1000 again this week.  RUT gained 0.32% while RUI was up only 0.06%.  This puts the Russell 2000 higher by 5.01% for the year and the Russell 1000 up 2.27%.  The widening performance gap shows up in the price chart below where I indexed both the Russell 2000 and Russell 1000 to 100 at the beginning of the year.



The Week in VIX – 6/8 – 6/12

Despite a treacherous Friday in the equity markets, VIX was lower last week as were all the VIX futures contracts.  We truly had a textbook shift lower in the curve as VIX dropped just over 3% and the front three months played a little catch up to the downside with June going off the board this coming week.  The slope of the curve still appears pretty steep to me going into the end of 2015 despite the uniform drop in prices last week.

VIX Curve

June VIX futures and options expire on the open this coming Wednesday.  The Friday before expiration I’m always on the lookout for trades that appear to be trying to anticipate where the market will be either on the close Tuesday before expiration or at settlement on Wednesday morning.  With VIX at 13.86 and the June future around 14.15 I came across a trade that looks like there is an expectation for lower VIX over the next couple of days or just that the June contract will drift down to where the spot index is trading as time runs out on the June VIX options.

The trader sold a few hundred VIX Jun 14.50 Calls at 0.45 and at the same time purchased VIX Jun 14.50 Puts for 0.80 and a net cost of 0.35.  Astute traders, or anyone that looked at the payoff diagram below, knows that this is a synthetic short position with the equivalent entry point of 14.15.  If held to settlement this is the over / under for the trade being a profit or loss.  Do note that VIX at 13.86 is 0.29 lower than the break-even price of 14.15 so in the unlikely event that VIX remains unchanged between now and Wednesday morning settlement this trade would actually be a winner.


The Week in Volatility Indexes and ETPs – 6/8 – 6/12

The curve shift shown below kind of looks like the June 12th line is taking a swipe at the June 5th line with VXST throwing the punch.  Short term volatility climbed Friday relative to the other volatility measures and the result was a pretty interesting and possibly worrisome change in the VXST – VIX – VXV – VXMT curve.  Time will tell, but VXST at a premium to VIX usually is a result of a market drop or market participants having short term concerns about the equity market.  We had a small market drop on Friday, but nothing that we haven’t experienced dozens of times in the past few years.  I see another FOMC rate decision coming next week as well as CPI being reported Thursday before the open.   It could be that some traders are a bit concerned about the market reaction to either or both of those events.