In 2012 VXAPL Rose 25.5% and VXGOG Fell 7.1%

Many investors noted the lack of volatility in the broad stock markets in 2012 – the CBOE Volatility Index® (VIX®) Index had an average daily closing value of 17.82 for the year, the lowest such value since 2007.

Some tech stocks experienced more volatility than the S&P 500 in 2012. For example, Apple (AAPL) rose in the first three quarters, but then faced some challenges in the fourth quarter as there were poor reviews for the Apple Maps application on a new iPhone, and continued enhanced competition for the smartphone and tablet markets.

Here are the average daily closing values in 2012 for four volatility indexes designed to reflect expected volatility for key tech stocks —

These indexes can serve as helpful intraday or longer-term gauges of changes in implied volatility.

AAPL was up 31.4% in 2012, as it experienced a wide range of closing prices throughout the year, with a high daily close of $702.10 and a low daily close of $405.00.

To learn more about more than 20 volatility indexes, please visit

VIX Has Its Biggest Two-Day Fall – 35.4%; Record Futures Volume

Jan. 2, 2013 – On the two most recent trading days of Dec. 31st and Jan. 2nd –

  • The CBOE Volatility Index® (VIX®) fell by 35.4%, the biggest-ever drop (in percentage terms) over two trading days for the VIX Index, which has historical data back to 1990; and
  • Futures on the VIX Index set new trading volume records on both days, with 212,800 contracts on Dec. 31st, and an estimated 221,323 contacts on Jan. 2nd.

Over the past six trading days the VIX has had a roller-coaster ride as investor sentiment shifted in regard to perceived prospects for a near-term solution to the U.S. fiscal cliff situation. Daily closing prices on the VIX went from 17.84 on Dec. 24th, to 22.72 on Dec. 28th, to 14.68 on Jan. 2nd.


The table below shows the prices for the VIX Index and near-term VIX futures; the table is updated intraday at While the record VIX futures trading volume in recent days is driven by a variety of investors, it is probable that some investors have tried to go long the Jan. ’13 VIX futures at around 15.60, or the Feb. ’13 VIX futures at around 16.72, as a strategy to attempt to diversify their overall portfolios. To learn more about strategies to use VIX futures and options for diversification and risk management, please visit


Links to a paper on “VIX Futures and Options – A Case Study of Portfolio Diversification During the 2008 Financial Crisis” (July 2009):    Two-page summary    Full report     Press Release

VIX Futures – Record Volume Day and Year

Dec. 31, 2012 – Here is a year-end update on VIX and select options-based indexes —

  1. Futures on the CBOE Volatility Index® (VIX®) set a new single-day volume record of 212,800 contracts (estimated) today. The new daily record eclipsed the previous single-day record of 190,081 contracts traded on September 13, 2012.
  2. VIX futures are poised for another record year in 2012, with trading volume up 86 percent through November.
  3. The VIX Index was down 20.7% today, its biggest one-day drop (in percentage terms) since August 8. 2011.
  4. VIX futures prices also dropped today. As shown in the table at, the Jan. ’13 VIX futures price fell by 4.67 points to close at 17.68 today.

5. Here are the % changes in 2012 for select indexes —

  • 10.2%                    BXY – CBOE S&P 500 2% OTM BuyWrite Index
  • 8.1%                      PUT – CBOE S&P 500 PutWrite Index              
  • 6.7%                      CLL – CBOE S&P 500 95-110 Collar Index        
  • 5.2%                      BXM – CBOE S&P 500 BuyWrite Index            
  • 4.3%                      LOVOL – CBOE Low Volatility Index                  
  • -23.0%                  VIX – CBOE Volatility Index                 


Happy New Year to all!

VIX Has Biggest 1-Day Jump of 2012; 6 Key Facts

Dec. 28, 2012 – Here is an update on 6 key facts about the VIX and related indexes and trading instruments —

(1)    Today (Friday) the CBOE Volatility Index® (VIX®) rose 16.7%, its biggest one-day up move (in percentage terms) since November 2011.  A key factor in the rise in the VIX is investor uncertainty about the year-end budget negotiations of U.S. lawmakers.

(2)    Today’s closing values (and point changes) for the VIX Index and select VIX futures include –

  • 22.72 (up 3.25) — VIX Index (spot)
  • 22.35 (up 3.25) — VIX Jan. ’13 futures
  • 21.92 (up 2.52) – VIX Feb. ’13 futures
  • 21.98 (up 1.88) – VIX Mar. ’13 futures
  • 24.41 (up 0.81) – VIX Sep. ’13 futures

The spot and Jan. numbers above appear to indicate that some traders do have some heightened anxiety about volatility and uncertainty over the next month, but the Feb. and Mar. numbers indicate that there could be less anxiety about volatility 3 months from now (and perhaps many anticipate that the U.S. budget negotiations will be finished by then).

If you would like to see delayed quotes on select VIX futures, please visit the VIX microsite at and examine this table that is updated throughout trading days —

(3)    While the VIX is a measure of 30-day expected volatility, the CBOE S&P 500 3-Month Volatility Index (VXV) is designed to be a constant measure of 3-month implied volatility of the S&P 500  In 2012 the daily closes of the VXV Index were (on average) about 2.8 points higher than the VIX Index. However, today the VIX close (22.72) was 0.82 higher than the VXV close (21.88).  The last time that the VIX close was more than 0.50 higher than the VXV close was in Nov. 2011.

(4)    The average daily closing price of the VIX in 2012 (through Dec. 28) was 17.8, the lowest such figure since 2007.

(5)    The CBOE’s VIX of VIX Index (VVIX) is an important measure of the expected volatility of the VIX  Today the VVIX Index closed at 104.72, its highest daily closing value since July 25, 2012.

(6)    VIX futures and options both have experienced record trading volumes in 2012. In November 2012 the average daily volume (A.D.V.) in VIX futures reached a new record of 130,202 contracts, an increase of 233 percent over the 39,144 contracts per day November 2011, and up 12 percent versus the A.D.V. of 116,375 contracts in October 2012.

To learn more about VIX and related indexes and trading instruments, please visit

The Disciplined Investor Podcast: Understanding VIX

In a recent podcast with Andrew Horowitz from The Disciplined Investor, I discussed what the VIX is, how it is structured and common misconceptions about the index.  Click here to listen to the full podcast.

Last Week’s VIX Action

Most of the week Dec VIX futures were at a discount to the spot VIX index. This was despite the November employment report being released on Friday. The market yawned at the report with the S&P 500 finishing up slightly on the week and VIX finished the week basically unchanged. The December contract spent most of the week at a discount to the index, but traded to a slight premium on Friday. January was slightly higher while the rest of the VIX futures contracts traded lower and the result was a flattening of the curve.

The December futures price action, basically in line with the index, is a clear indication that the market expects any volatility to occur after December expiration (December 19). On the other side of the coin, January futures are at a consistent premium to the index and of course December contract. From an academic and market watcher standpoint this is an interesting scenario to watch unfold.

The NASDAQ-100 and VXN activity was a completely different story last week based on price action in a single stock – Apple (AAPL – 533.25). The NDX lost about 1.4% last week and VXN traded up over 9% on the week. The interesting thing is that the futures curve experiences a fairly parallel move. This indicates that the feeling in the market place is that higher volatility for the NDX may be around for a while.


With VIX drifting around last week and December VIX futures at a discount to January contracts the long VIX ETPs were mostly lower on the week.  Something of note was the underperformance of VXZ which indicates lower anticipated volatility in the 1st quarter of next year.  Every VIX future contract from February out was lower last week and this is reflected in the VXZ losing over 2% on the week.  The majority of ETPs focus on the front two month contracts and it appears December futures are going to be complacent, while the January contract is the one that gathers all in the attention for the rest of the year.  This thought depends on the fiscal cliff talks dragging out until after December expiration and being resolved (one way or another) before January expiration.


The hedged and low volatility funds did well as US stocks were slightly higher despite the weight of AAPL.  Emerging markets our performed US stocks (AAPL is not in that index…) and that can be seen with the EEMV being the best performing of the actively traded VIX related exchange traded products.

There was something new in the exchange traded product area this week.  On Thursday the PowerShares S&P 500 Downside Hedged Portfolio (PHDG – 25.16) began trading.  The press release describing the strategy behind PHDG involves exposure to the S&P 500, VIX futures and cash depending on market volatility.  This ETF joins the VIXH, which uses VIX call options dynamically combined with investment in the S&P 500 to achieve hedged performance as a convenient method to have equity market exposure hedged with volatility exposure.

The word of the week in the VIX Options pit was ‘quiet’.  Whenever I hear that the old saying, “it is quiet…too quiet” pops in my mind.  VIX was fairly range bound, VVIX is low, and December VIX futures were trading at a discount to the VIX index most of the week.  An article I came across mid-week did note that the majority of VIX option trading is in opening new out of the money call positions.   The article highlighted huge open interest in the VIX Jan 25 Calls (almost 400,000 contracts) as an option that appears to have a lot of demand as a speculation on or hedge against the stock market dropping if we go over the fiscal cliff.

VIX Futures – Prices and Record Volume

FRIDAY, DEC. 7 – People often ask me where they can find comparisons of the prices of the popular VIX® (spot) Index and the VIX futures. A good place to start is near the top of the VIX microwebsite at ,

which has the following table that is updated intraday with delayed price quotes —

The middle row above denotes that the delayed quote for the VIX Dec. ’12 futures was 16.01, and it fell 0.39 today.

The table below has the VIX futures settlement prices, open interest and trading volume by expiration date.  Note that the VIX futures prices rise from 16.00 for the Dec. ’12 futures, to 22.70 for the Aug. ’13 futures.

Another blog post today with more details on VIX futures and concerns about the fiscal cliff is entitled “Unusual Twist In VIX Futures Term Structure Of Late.”


In November 2012 the average daily volume (A.D.V.) in VIX futures reached a new record of 130,202 contracts, an increase of 233 percent over the 39,144 contracts per day November 2011, and up 12 percent versus the A.D.V. of 116,375 contracts in October 2012.


Introducing the CBOE Low Volatility Index (LOVOL)

Nov. 29, 2012 – Today CBOE introduced the new CBOE Low Volatility IndexSM (ticker: LOVOL), a benchmark index designed for investors whose preferences have shifted from investing in riskier assets to lower-volatility assets. The LOVOL Index aims to provide investors with the ability to replicate an investment strategy that is subject to less downside volatility in a portfolio of S&P 500 stocks, while still preserving the bulk of market gains.

The LOVOL Index is a blend of two of CBOE’s popular strategy benchmark indexes –

The CBOE LOVOL Index measures the performance of a portfolio that overlays SPXTM and VIX® calls over the S&P 500 Index. The index holds a portfolio of S&P 500 stocks and simultaneously selling SPX calls and buying monthly VIX 30-delta calls on a monthly basis.


The backtested historical data time series for the LOVOL Index begins in March 2006, the month after the launch of VIX options.  In the period from March 31, 2006 through October 31, 2012, here are the percentage changes for select total return indexes – LOVOL up 40%, S&P 500 up 25%, Russell 2000 up 17%, and MSCI EAFE up 1%.

For the five-year period ending in October 31, 2012, the annualized return for the LOVOL Index was 2.9% (versus 0.4% for the S&P 500 total return index), and the standard deviation for the LOVOL Index was 13.6% (versus 19.1% for the S&P 500 index).

Since March 2006, the worst one-calendar-month drawdowns were down 9% for the LOVOL Index, down 16.8% for S&P 500, and down more than 20% for both the Russell 2000 and MSCI EAFE Indexes.



While the LOVOL Index uses options to help manage volatility, the S&P 500® Low Volatility Index measures the performance of the 100 least volatile stocks in the S&P 500. The index is designed to serve as a benchmark for low volatility or low variance strategies in the U.S. stock market. Constituents are weighted relative to the inverse of their corresponding volatility, with the least volatile stocks receiving the highest weights.


Subsequent to the 1993 introduction of the CBOE Volatility Index® (VIX®), CBOE introduced more than 20 volatility indexes that are posted at  After the 2002 introduction of the CBOE S&P 500 BuyWrite Index (BXMSM), CBOE introduced ten option-related benchmark indexes that are available at

CBOE will disseminate the CBOE LOVOL Index value every 15 seconds during the trading day. The index values will be available from quote data vendors and at the LOVOL webpage


Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. The information in this document is provided solely for general education and information purposes. Past performance is not indicative of future results. No statement within this document should be construed as a recommendation to buy or sell a security or to provide investment advice.


Consumer Sentiment Index Reaches 5-Year High

A Bloomberg news story on Friday Nov. 9th noted –

“Confidence among U.S. consumers climbed to a five-year high in November, improving the prospects of bigger spending gains that will help spur the expansion.  The Thomson Reuters/University of Michigan preliminary consumer sentiment index rose to 84.9, the fourth straight increase and the highest since July 2007, from 82.6 in October. Economists projected an initial reading of 82.9 for November, according to the median estimate of 71 economists surveyed. … “


The chart below compares the movement of the consumer sentiment index to the movement of two indexes that are tied to investor sentiment – the S&P 500® (SPX) Index and CBOE Volatility Index (VIX®).  Over the past decade, the SPX is up about 50%, the consumer sentiment index is roughly unchanged, and the VIX is down about 32%.  One might think about different factors – unemployment, inflation, globalization, debt levels, entitlements, wars – that could have differing impacts on the stock indexes and consumer sentiment index.

On the topic of sentiment and investing, I found it interesting to read an October Barron’s interview of Gus Sauter, the Chief Investment Officer of Vanguard, who was quoted as follows:

“I’m 90%-plus [in equities]. I like the fact that everyone is worried about the stock market. That’s when the market is set up to do well. When people throw caution away, I get nervous.”


Please visit the links below for info on how you can implement bullish and bearish investment strategies –

SPX Options Volume Jumps to 1.15 Million Today

WED. NOV. 7 — Today, the day after the U.S. election, the trading volume for S&P 500® (SPX) options was a strong 1,153,017 contracts, the biggest volume day for SPX options since Sept. 14th.  For comparison purposes, the average daily volume for SPX options on the previous 8 trading days was 613,248.

Today the S&P 500 Index dropped 33.86 points to close at 1,394.53.

Today’s SPX trading volume included 520,237 calls and 632,780 puts for a put-call ratio of 1.22, the lowest daily SPX put/call ratio since Oct. 23.  Some observers try to glean hints as to changes in investor sentiment from put-call ratios.


Here are the daily closing levels for SPX on 4 recent select dates —

  • 14-Sep-12                   1,465.77
  • 5-Nov-12                     1,417.26
  • 6-Nov-12                     1,428.39
  • 7-Nov-12                     1,394.53

The VIX-and-more Blog noted —

“SPX Pullback Hits 5.9%, Fourth Longest Drawdown Since March 2009 Bull Began  The S&P 500 index fell as low as 1388 today, down 86 points or 5.9% from its September 14th high of 1474.  … Note that while a 5.9% drawdown is right in the middle of the pack in terms of the magnitude of the drop, the 36 days that it has taken for stocks to fall that far makes the current pullback the fourth longest in terms of peak-to-trough duration. …”


SPX 1-week Chart


As the SPX Index fell today, a number of related volatility indexes rose; for example, the CBOE Volatility Index® (VIX) rose 1.5 to 19.08, CBOE Equity VIX® on Apple (VXAPL) rose 2.1 to close at 33.24, and the CBOE Equity VIX® on Goldman Sachs (VXGS) rose 3.3 to close at 33.81.

VIX – 1-week Chart

Today’s strong volume totals included 216,567 VIX call options, 133,120 VIX put options, and about 179,000 VIX futures.

The put/call ratio for VIX options has risen each of the past 4 trading days —

  • 11/2/2012        0.27
  • 11/5/2012        0.48
  • 11/6/2012        0.49
  • 11/7/2012        0.61


To learn more about options and strategies to manage risk and enhance income, please visit these webpages —



  • Recent Comments

  • Tags

  • authors


  • Quick Links

  • Blogroll

  • Follow Us

  • Archives