OptionsHouse

Options Trading News

January 25, 2013  Fri 12:45 AM CT

VIX: SEE CHART GET CHAIN FIND STRATEGIES
Equity indexes ended yesterday mixed and little-changed, but the CBOE Volatility Index and its futures pushed higher.

The S&P 500 finished the session at 1494.82, up just 0.01 points but posting yet another five-year high in its eight straight day of gains. It had climbed to 1500 in the morning and up to 1502 before slipping into the afternoon. Resistance remains at 1500 and support at 1460.

The Nasdaq 100 was down more than 38 points, or 1.4 percent, to close at 2723.53 with Apple's 12.35 percent drop. The NDX closed just above the early afternoon low. Wednesday's high of 2770 should prove to be first resistance, while support at 2704 may be tested quickly.

The Russell 2000 had the best day of the three indexes. It gained more than 3 points to end the session at 900.19, closing above the 900 mark for the first time. The small-cap index had climbed as high as 904 in the late morning, a level that could be near-term resistance while support remains at 872.

The VIX was was up 0.23 points, or 1.85 percent, to 12.69. It was higher almost the entire day, peaking at 13.50 with two hours left to trade before giving up ground.

The VIX futures were also higher, with the February contracts rising 0.25 points to 13.95 and outpacing the spot volatility index for most of the day. The March futures closed at 15.10, up 0.05 points. The total futures volume was more than 184,000 contracts, making it the fourth-busiest day and likely driving the open interest to a record high.

The VIX options turned over 845,000 contracts, keeping up its strong volume of late. Calls outpaced puts by more than 2 to 1. The VVIX Index, which measures the implied volatility of the VIX options, was up 6 percent to 76.17.

The data is very interesting, as the VIX is relatively low but still at about a 200 percent premium to the short-term actual volatility of the SPX. We see similar data in the VIX volatility itself.

There are stories about big "volatility bulls throwing in the towel," and on the other side PIMCO recommends buying hedges now while they are cheap.

One line came that through a data feed said, "VIX poised to trade to new record low means investors can profit from calls and puts without paying fear or greed premium." My answer to that is: No and no.

The VIX isn't going to be down to 9 anytime soon and, while you can profit with calls and puts, you are paying a pretty significant fear premium right now.
Share this article with your friends


Related Stories

VIX

VIX at highest level in 4 months

June 29, 2015

The CBOE Volatility Index is up 23.75 percent to 17.35 in midday trading, just off its intraday peak and its highest level since Feb. 11.

VIX

DRJ: Keep a close eye on volatility

June 29, 2015

As the Greek crisis intensifies, we are likely to see an explosion in volatility as widespread selling in European markets in turn pressures our indexes.

VIX

Video: Heavy July VIX call selling

June 24, 2015

After a steady stream of buying recently, Group One's Jamie Tyrrell says a trader sold 75,000 July 17 calls yesterday, and those levels are holding today.

VIX

Videocast: Cheap VIX call buying

June 23, 2015

With the volatility index down again today, Group One's Jamie Tyrrell says traders are buying July VIX calls but for much lower prices than last week.

VIX

Video: August insurance in VIX

June 22, 2015

After last week's heavy volume paused on Friday, Group One's Jamie Tyrrell says VIX call buying has resumed with traders focused on August.

OptionsHouse

Premium Services

Archived Webinar

Education & Strategy

Real vs. Synthetic

We now know that there are two ways of creating a call position, a put position, and a stock position. We can simply use the actual real security or we can recreate it synthetically. We can create these positions in both long and short forms and this ability sets up an interesting scenario--an arbitrage!

View more education articles »