Category Archives: Financial Markets

“Drought” Options – Implied Vol Up 50% This Month

A recent Reuters news report indicated that “Grain prices pushed to record highs on Thursday as scattered rains in U.S. Midwest did little to douse fears that the worst drought in half a century will not end soon or relieve worries around the world about higher food prices.  Government forecasters did not rule out that […]

Performance of Selected Tradable Volatility Indices: June 2012

The S&P 500 Index rose 4% in June 2012, and VIX dropped 29% from 24.06 (5/31/2012) to 17.08 (6/29/2012). The S&P 500 VIX Short Term Futures Index and the S&P 500 VIX Mid Term Futures Index dropped 29.05% and 12.24%, respectively. The S&P 500 Dynamic VIX Futures Index, however, managed to stay nearly flat (-0.58%), […]

Performance of Selected Tradable Volatility Indices: May 2012

May 2012 was a restless month in the US equity market. The S&P 500 Index declined 6% and VIX rose 40% from 17.15 (4/30/2012) to 24.06 (5/31/2012). The S&P 500 VIX Short Term Futures Index and the S&P 500 VIX Mid Term Futures Index rose 28.71% and 13.13%, respectively. The S&P 500 Dynamic VIX Futures […]

The Other Side of VIX

The last three months saw the VIX spot dropped quickly from 30-ish to 10-ish. No wonder XIV, the inverse ETN to the S&P 500 VIX Short-Term Futures Index, was among the top performing ETPs in January. Its return was 30.88% in January 2012 and 14.02% in December 2011. S&P Indices General Disclaimer XIV collects daily […]

VEQTOR & Other Volatility Reduction Indices

Today I’m going to discuss three prepacked investment solutions that seek positive exposure to the equity market with different volatility reduction approaches: S&P 500 Low Volatility Index: uses stock selection and alternative weighting to minimize portfolio volatility without the use of derivatives or active hedge. PowerShares has issued an ETF (ticker SPLV) that tracks this […]

Exchange Traded Volatility Products in Europe

In Europe, ETFs and ETNs linked to the S&P 500 VIX Futures Indices and the VSTOXX Futures Indices collectively have nearly $380 million in assets ), as listed in Exhibit 1 (note: volume is the average daily volume in December 2011). Exhibit 1: Exchange Traded Volatility Products in Europe (Dec. 2011) Compared with the S&P […]

Volatility Benchmarks in Europe

In Europe, regional volatility indices have been developed and published to measure the implied volatility in local markets. VSTOXX, VDAX-NEW, VFTSE follow the CBOE VIX methodology and have become the investor fear gauge in the Europe, German and UK markets. Exhibit 1 shows that these indices are highly correlated. Since Jan. 2000, VSTOXX have been […]

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