Options Trading News

February 12, 2009  Thu 9:46 AM CT


VIX Chart

The S&P 500 has dropped more than 2 percent, driving its volatility index back up more than 5 percent and above the VIX futures.

The VIX is up to 46.83 on this morning's drop in the SPX, which at 815 is pushing toward its lowest levels since Jan. 20. The 6 percent gain in the volatility index has it back above the February VIX future, which sits at 46.45. The spot VIX reading closed yesterday just below that future in what appeared to be a bullish sign but, as we noted earlier this morning, it did so on lighter volume.

The new VIX-based exchange traded notes will allow another way of looking at the VIX "term structure." While there is only a small amount of data so far, we will eventually be able to compare the relative values of the VXX short-term futures ETN and the VXZ medium-term note.

Currently that ratio is approaching its highest level. The only other time it was this high was on Feb. 2, when the SPX bounced off its low of 812 and rallied 60 points. This is not to say that will happen again, but the ratio should nonetheless prove useful going forward.

(Chart courtesy of trade MONSTER)

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