Tag Archives: VIX

A new volatility regime? VIX® don’t think so!

Global equity markets experienced a challenging February.  A U.S.-led selloff triggered a spike in volatility; the Cboe Volatility Index (VIX) recorded its largest ever daily increase on February 5 to reach its highest level since August 2015. But is higher volatility here to stay? Towards the end of last year, we published a paper – Read more […]

Decomposing Recent Volatility Events Part 2

In my previous blog, we compared a daily inverse index to a “true short” and discussed the increasing vega exposure in the S&P 500® VIX® Short Term Futures Inverse Daily Index over the past couple of years. In this blog, we analyze how the mechanics of a VIX futures index, a low volatility environment, and Read more […]

Decomposing Recent Volatility Events Part 1

After a strong January 2018, the U.S. equity market started February with a roller coaster ride. The CBOE Volatility Index® (VIX®), which has been relatively quiet over the past couple years, spiked up and crossed the 50 mark intraday on Feb. 5, 2018. On the same day, the S&P 500® VIX Short Term Futures Inverse Read more […]

What just happened in VIX … and is it over yet?

In recent years, strategies selling volatility (and VIX® futures in particular) garnered substantial attention due to the low levels of VIX and the eye-watering returns achieved by associated benchmarks such as the S&P 500® VIX Short-Term Futures Inverse Daily Index (we’ll call it the “short VIX index” here for convenience).   At the end of last Read more […]

Buying High and Selling Low: The Counterintuitiveness of VIX® Trading

With 2017 in the rear view mirror, we can look back and observe that short VIX strategies rank as one of the most profitable strategies of the year. The S&P 500® VIX Short-Term Futures Inverse Daily Index returned 186.39%, and selling VIX futures has become a popular income-generating strategy. 2017 was also a year marked Read more […]

Selling Equity Options or VIX® Futures: Two Different Ways to Short Volatility

2017 was a great year for shorting VIX futures strategies. The S&P 500® VIX Short-Term Futures Inverse Daily Index returned 186.39%. Selling volatility does not rely on interest rates or dividends. Historically, investors have been selling options to generate income. Compared to selling equity options, selling VIX futures is an operationally simple strategy that can Read more […]

Tail Hedging a High Yield Bond Portfolio With VIX® Futures

In one of my previous blog posts, we demonstrated that high yield bonds exhibited a strong negative correlation with VIX and an even stronger one with VIX futures, which comes mostly from down markets. This prompted us to think that VIX futures may hold tail-risk hedging opportunities for high yield bond portfolios. In this blog, Read more […]

2017: A Selection of Highlights

As we rapidly approach Christmas and New Year (not to mention year-end evaluations) it seems fitting to reflect on what happened in 2017.  We will publish our regional month-end dashboards on December 29 (interested parties may sign up here).  Before then, here are a few highlights using data as of December 15. Volatility was historically Read more […]

What is VIX Predicting about Future Volatility?

VIX® closed last night at 11.33.  What, if anything, does that mean? We recently published a research paper, together with a more digestible practitioner’s guide, that provides a method for converting a given VIX level into an expectation for S&P 500® volatility over the next 30 days.  Exhibit 1 shows that these estimates have provided Read more […]

Low Volatility, VIX and Behavioral Finance

As this week’s award of the Nobel Prize in Economics to Richard Thaler confirmed, the existence of behavioral biases in finance is no longer a controversial theory.   People often prefer a small chance of a large gain to a near-certain chance of a small gain, even if the expected return from the latter is higher.  Read more […]