#CBOE Volatility Index

[kc22invesmentsblog]

Understanding Stock Market Volatility: A Closer Look at the CBOE Volatility Index (VIX)

Written by Delvin The stock market is a dynamic environment, subject to periods of both stability and volatility. Investors and traders alike often monitor the ebb and flow of the market’s volatility, seeking to understand and anticipate its impact on their investments. Central to this quest is the CBOE Volatility Index (VIX), commonly known as the “fear gauge,” a measure of the market’s…

[jeffhirsch]

Market Not Out of October Woods Yet

Aside from weakness earlier in the month, this October has been rather sanguine. S&P 500 and DJIA have recorded new all-time highs and extended a weekly advancing streak to six in a row. But throughout the month the CBOE VIX index has remained stubbornly elevated around 20 and the 10-year Treasury bond yield has risen back above 4.10% while gold is also trading at new all-time highs.

Although the market did close mixed today, DJIA, S&P 500, Russell 1000 and 2000 were down while NASDAQ recorded a modest advance, today’s trading seems like a reminder that it is still October, and more volatility is not out of the question. At least until after the dust has settled on the presidential election.

Looking at October’s Election Year seasonal patterns compared to 2024 above, this October’s mid-month strength stands out as being well above average while today’s weakness aligns with the beginning of a typical, seasonal pullback in the second half of the month. Market weakness could last through the rest of this month before bouncing back during the final week of October.

[dragonflycap]

5 Trade Ideas for Monday: Cboe, Salesforce, Edwards Lifesciences, Honeywell and Intercontinental Exchange

5 Trade ideas excerpted from the detailed analysis and plan for premium subscribers:

Cboe Global Markets, Ticker: $CBOE

Cboe Global Markets, $CBOE, comes into the week at resistance. It has a RSI rising at the midline with the MACD crossed up. Look for a push over resistance to participate…..

Salesforce, Ticker: $CRM

Salesforce, $CRM, comes into the week at resistance. It has a RSI rising with the MACD crossed up. Look for a push over resistance to participate…..

Edwards Lifesciences, Ticker: $EW

Edwards Lifesciences, $EW, comes into the week at resistance. It has a RSI in the bullish zone with the MACD positive. Look for a push over resistance to participate…..

Honeywell, Ticker: $HON

Honeywell, $HON, comes into the week after breaking yearlong resistance. It has a RSI in the bullish zone with the MACD positive. Look for continuation to participate…..

Intercontinental Exchange, Ticker: $ICE

Intercontinental Exchange, $ICE, comes into the week at resistance. It has a RSI in the bullish zone with the MACD positive. Look for a push over resistance to participate…..

Start of Summer Annual Sale! Hi all the Start of Summer Annual Sale is entering its last week at Dragonfly Capital. Get an annual subscription for 38.2% off or pay quarterly for 15% off. Both auto-renew at that discounted rate until you decide to leave.

After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which with the June quadruple witching in the books in the books, saw equity markets a bit gassed after a good start.

Elsewhere look for Gold to continue its consolidation in the uptrend while Crude Oil moves higher in consolidation. The US Dollar Index continues the short term move to the upside while US Treasuries continue their short term move higher in the secular downtrend. The Shanghai Composite looks to continue the short term trend lower while Emerging Markets look to be on the verge of breaking consolidation to the upside.

The Volatility Index looks to remain very low making the path easier for equity markets to the upside. The charts of the SPY and QQQ look strong, especially on the longer timeframe, but with possible reversal or digestion candles this week. On the shorter timeframe both the QQQ and SPY could us a reset on momentum measures as both are extended and pullbacks are helping there. The IWM continued to go nowhere moving mainly sideways in the upper part of the 2½ year consolidation. Use this information as you prepare for the coming week and trad’em well.

[financemadeeasy]

Find out what is Volatility Index or VIX

Learn all about Volatility Index

What is VIX? The VIX, or Volatility Index, is a real-time market index that reflects the market’s expectations for volatility over the coming 30 days. The VIX is often referred to as the “fear gauge” or “fear index” because it tends to spike during periods of market uncertainty or stress. It was created by the Chicago Board Options Exchange (CBOE) and measures the implied volatility of S&P 500…

[dataanxiety]

Nice historical volatility chart

This is a helpful annotated chart of yearly S&P 500 volatility. I bookmarked it back in 2014, so it only covers the years from 1929 to 2014.

S&P 500 calendar year realized volatility from 1929-2014 $SPY $SPX $VIX

— via Ro_Patel on StockTwits, October 09, 2014

The y-axis is S&P Calendar Year Realized Volatility as a percentage. The x-axis is time in years. I hope it is possible to enlarge the image by clicking on it! The red bars represent the 10 years with highest volatility. The green bars represent the 10 years with the lowest volatility. I am guessing that the blue bars are all other years.

I wondered why the chart was tagged with $SPY $SPX and $VIX. Both StockTwits and Twitter used to denote stock symbols with a dollar sign instead of a hash tag.

The first two were easy. SPY is an ETF that is backed by actual shares of stock in the companies that are included in Standard & Poor's 500 index. SPX is driven by the price of the S&P 500 Index itself. SPX isn't tradeable per se, but there are SPX futures and various SPX options.

Volatility and the fear indicator

Volatility is the standard deviation of a stock, stock index, or other security's annualized returns over a time period; essentially, the rate at which the security or index price increases or decreases. ‘Actual’ (historical) volatility measures the variability of known prices.

What is $VIX

VIX is called the fear indicator because it is used to infer a quantitative metric of market risk, fear, and stress. It is defined as the 30-day expected volatility of the S&P 500 stock index, using Chicago Board Options Exchange (CBOE) listed S&P 500 options data. VIX is a measure of implied volatility (forward-looking) not historical. Values over 30 are considered high, while 20 is more typical. There's no upper bound on VIX.

The VIX isn't tradeable, which is why I am amused that its CBOE landing page (URL above) has "tradeable" in the URL! Instead, there are VIX futures, call and put options for trading.

The VIX was introduced by CBOE in 1993. I think that's why this chart doesn't have VIX on the y-axis (only alluding to it with $VIX) as an historical time series. It wouldn't be possible to impute historical values, especially not to 1929 but not even prior to 1993, because VIX is calculated by aggregating weighted prices of a constantly changing portfolio of S&P 500 calls and puts over a range of strike prices.

StockTwits

StockTwits seems mostly moribund to me, since about 2015. The name is a little strange, but it is a great idea: A social network for investor/speculators. The realtime, Twitter-like functionality, and user interface, are well-designed and fun. I think StockTwits was founded by Howard Lindzon who is nice, and maybe Fred Wilson the AVC guy ("A Venture Capitalist"?). EDIT: I just checked. It is still active but not exactly a huge startup venture.

Now that Amazon.com has retired Alexa, I can't find website metrics as easily. I'm mildly curious about StockTwits. I wish I could average unique annual page views per year, and then do a 3-line time series graph of unique daily views during 2012 (when it was really active), 2015, and last year.

[harbourfronttechnologies]

VIX Manipulation: Evidence from SPX Options and Market Data

VIX Manipulation: Evidence from SPX Options and Market Data Market manipulation refers to intentional actions taken to distort the normal functioning of financial markets, often to benefit specific individuals or entities at the expense of others. These actions can include spreading false information, rigging prices, or creating artificial demand or supply. A notable example is the LIBOR manipulation scandal, where several major financial institutions colluded to manipulate the London Interbank Offered Rate (LIBOR), a benchmark interest rate used globally to set borrowing costs for trillions of dollars in loans and derivatives. By submitting false rate estimates, these banks influenced LIBOR to their advantage, impacting everything from mortgages to corporate loans. Reference [1] examined the alleged manipulation of VIX, the volatility index. Market observers claimed that unidentified manipulators, aiming to influence the index, submitted aggressive orders in out-of-the-money (OTM) S&P 500 index options that are included in the VIX calculation. According to these allegations, manipulators profited from these artificial price movements through positions in VIX-related products such as options and futures. The paper utilized three datasets obtained from the CBOE, covering the period from January 2011 to August 2018, to conduct the study. The author pointed out, Based on detailed investor-class level data for the period from January 2011 until August 2018, I examine several relations to identify potential manipulative activity during the VIX settlement period. I show that investors within the customer group (i.e., hedge funds and money managers) move prices during the special opening auction and align their price impact to profit from the resulting settlement deviations. Furthermore, I find that customers spread their trading volume across the options used in the calculation of the settlement value proportional to the respective VIX sensitivity. This is consistent with the optimal trading strategy to manipulate the VIX, as shown by Griffin and Shams (2018). Finally, customers’ exposure adjustments the day before expiration predict price movements during the subsequent special opening auction. This suggests that customers anticipate the direction of the VIX movements, which is consistent with manipulation. Over the sample period from June 2011 to August 2018, settlement deviations caused market distortions that amount to $4.7 billion. Customers benefit from these deviations and earn $91 million over the respective period. These results stress the vulnerability of the VIX settlement process in its current form. In summary, the author provided evidence supporting claims of VIX manipulation. This article contributes to improving market transparency and functionality. Let us know what you think in the comments below or in the discussion forum. References [1] Manuel Leininger, Essays on Derivatives Markets, University of Konstanz, 2024, Chapter 1 Article Source Here: VIX Manipulation: Evidence from SPX Options and Market Data via Harbourfront Technologies - Feed https://ift.tt/167VHTq December 26, 2024 at 07:33PM

[allthenewzworld]

Wall Street's fear gauge - the VIX - spiked by the second biggest percentage in its history on Wednesday, after the Federal Reserve jolted the stock market by saying it would dial back its rate-cutting campaign.

The CBOE Volatility Index surged 74% to close at 27.62, up from around 15 earlier in the day. That surge is the second-greatest in history, behind a 115% leap to above the 37 handle back in February 2018 when there was a blow-up in funds tracking the volatility index.

See why the central bank's decision caused the move at the link in bio.

[top4allo]

Wall Street's Fear Gauge VIX Points to Local Bitcoin Bottom

Wednesday, December 18, will go down in history as a day of market panic The Fed cut rates by 25 basis points and Chairman Jerome Powell’s vision. Bitcoin (BTC) briefly falls below $100,000; U.S. stocks fell about 3%, while the dollar index ( DXY ) rose to a two-year high, continuing to weigh on currencies around the world. The most significant move came from the CBOE Volatility Index (VIX),…

[financepulse]

$JPM: JPMorgan expects the Cboe Volatility Index to average 16 in 2025, slightly higher than 2024.

[digicloudm]

Analysis-Investors cling to crash protection despite sizzling US stock market rally

By Saqib Iqbal Ahmed NEW YORK (Reuters) – Demand for options protection against an equity market crash is rising, even as a post-election rally takes U.S. stocks to record highs. Worries over the possibility of a contested election dissipated following President-elect Donald Trump’s victory earlier this month, helping the S&P 500 climb to an all-time high. The Cboe Volatility Index, one measure…

[usnewsrank]

High returns and low volatility from this little-known fund

  Saltydog Investor looks at funds investing in financial companies to reveal a star performer   Over the past couple of months, we have seen the overall level of volatility increase in stock markets around the world. This has been particularly pronounced in the Japanese Nikkei 225 and the Nasdaq. There was also a significant spike in the VIX at the beginning of August. The CBOE Volatility Index…

[dragonflycap]

5 Trade Ideas for Monday: Applied Materials, CBOE, Cigna, Deere and Vertex Pharma

5 Trade ideas excerpted from the detailed analysis and plan for premium subscribers:

Applied Materials, Ticker: $AMAT

Applied Materials, $AMAT, comes into the week approaching resistance. It has a RSI in the bullish zone with the MACD level and positive. Look for a push over resistance to participate…..

Cboe Global Markets, Ticker: $CBOE

Cboe Global Markets, $CBOE, comes into the week piercing resistance. It has a RSI in the bullish zone with the MACD positive. Look for continuation to participate…..

Cigna, Ticker: $CI

Cigna, $CI, comes into the week breaking resistance. It has a RSI in the bullish zone with the MACD positive. Look for a push higher to participate…..

Deere, Ticker: $DE

Deere, $DE, comes into the week approaching resistance. The RSI is in the bullish zone with the MACD flat and positive. Look for a push over resistance to participate…..

Vertex Pharmaceuticals, Ticker: $VRTX

Vertex Pharmaceuticals, $VRTX, comes into the week at resistance. It has RSI in the bullish zone with the MACD crossing up and positive. Look for a push over resistance to participate. ….

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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which heading into July options expiration, saw that equity markets showed strength moving higher all week until some profit taking Friday.

Elsewhere look for Gold to possibly reverse higher while Crude Oil rises in consolidation. The US Dollar Index broke through support and looks to continue lower while US Treasuries remain in consolidation. The Shanghai Composite looks to continue consolidation as well while Emerging Markets continue a short term move higher.

The Volatility Index looks to remain very low and stable making the path easier for equity markets to the upside. Their charts look strong, especially on the longer timeframe. On the shorter timeframe the IWM, the QQQ and SPY all broke clear of short term consolidation and have upside room. Use this information as you prepare for the coming week and trad’em well.

[miltonreese]

Milton Reese: Investor Confidence and Its Impact on Treasury Markets

Milton Reese: Investor Confidence and Its Impact on Treasury Markets

I categorize the factors that influence Treasury yields into the following main categories:

Investor confidence: When confidence is low, bond prices go up, and yields go down. The logic here is simple: demand for the safety of Treasuries increases, so lower yields indicate a cautious market.

Monetary policy: Although we see the 10-year Treasury yield as a benchmark for most rates, it is also affected by short-term rate changes. For instance, when the Fed raises rates, the federal funds rate increases, directly impacting Treasury yields.

Inflation expectations: U.S. Treasury yields can be split into real interest rates and inflation expectations. The market’s outlook on inflation significantly affects yield fluctuations. When economic data releases exceed expectations, they can significantly impact Treasury yields. For example, during periods of inflation control, if CPI, PCE, or employment report data surpasses market expectations, it indicates that the economic health supports further Fed rate hikes.

Unexpected events: Various geopolitical conflicts and wars can cause short-term yield fluctuations. On one hand, wars might drive investors to the safety of the bond market, causing yields to drop. On the other hand, conflicts, especially those involving oil, can raise inflation expectations and lift Treasury yields.

Here are some key indicators that might help you gauge the overall condition of the bond market:

10-year treasury yield: The 10-year Treasury is the most widely tracked government debt instrument in finance. Its yield is often used as a benchmark for other rates, like mortgage and corporate debt rates. So, this yield is seen as a gauge of investor confidence in the market.

U.S. dollar index: The movement of the dollar, as the world’s reserve currency, greatly impacts the U.S. bond market. When the dollar strengthens, it can attract foreign investors to the U.S. bond market, increasing bond demand, lowering prices, and pushing yields higher.

CBOE volatility index (VIX): This reflects market expectations for volatility in the S&P 500 over the next 30 days. During periods of increased market risk aversion and heightened investor concerns, the VIX rises, driving up demand and prices for safe-haven assets like U.S. Treasuries.

The longer the maturity of a Treasury, the higher the yield, because the longer investors’ money is tied up, the more return they require.

Short-term debt usually has lower yields than long-term debt. If we plot the yields of bonds from 1 month to 30 years on the horizontal axis, we get an upward-sloping yield curve — this is known as a normal yield curve.

However, sometimes the yield curve can invert, with shorter-term bonds having higher yields, resulting in a downward-sloping curve — this is an inverted yield curve.

Historically, the spread between the 10-year and 2-year Treasury yields has been seen as a precursor to economic recessions. A normal yield curve typically has a positive spread, indicating stable future economic conditions; an inverted curve, with a negative spread, signals potential economic deterioration. The 10-year to 2-year negative spread usually occurs 6 to 24 months before a recession and has accurately predicted every recession from 1955 to 2018, making it a reliable indicator.

An inverted yield curve, where short-term rates exceed long-term rates, usually signals an impending economic recession.

[harbourfronttechnologies]

Causal Relationship Between VIX ETPs and Futures in Low- and High-Volatility Regimes

Causal Relationship Between VIX ETPs and Futures in Low- and High-Volatility Regimes VIX Exchange-Traded Products (ETPs) are financial instruments designed to provide exposure to the CBOE Volatility Index (VIX), which measures the market's expectation of 30-day forward-looking volatility derived from S&P 500 options. VIX ETPs, such as ETFs and ETNs, allow investors to gain exposure to volatility without directly trading options or futures on the VIX. These products often use VIX futures contracts to simulate exposure to the VIX index, with strategies ranging from short-term to mid-term volatility. Research has focused on examining the lead-lag relationship between VIX ETPs and VIX futures. Reference [1] similarly investigates this relationship but goes further by examining the causal relationship across different regimes. Specifically, it categorizes the market into two regimes: regime 1, classified as low-mean, low-volatility, and regime 2, classified as high-mean, high-volatility. The authors pointed out, Cointegration tests reveal unique stable long-run equilibrium relations between VIX ETPs and Futures. Regime shifting models demonstrate the time variation in causation with the volatility of volatility, in particular highlighting different causal relations between ETFs versus ETNs, with causality more stable between high and low volatility regimes for ETFs. In our models, regime 1 is classified as low-mean low-volatile, while regime 2 is classified as high-mean high-volatile, with about 25 times larger volatility than regime 1. Markets return to equilibrium more swiftly regime 1 compared to 2. We observe time variation in causality with the volatility of volatility. In particular, demand pressures for VIX ETNs and futures can change in different regimes. For example, SPVXSTR sensitive to VXX in regime 1 than regime 2, and XIV is substantially more sensitive to TVIX in regime 2 than 1. On the other hand, we observe very little variation in causality between regimes 1 and 2 for the corresponding ETFs. In summary, for VIX Exchange-Traded Notes (ETNs), which are unsecured, the study observes a time variation in causality influenced by the volatility of volatility. Specifically, SPVXSTR is more sensitive to VXX in regime 1 than in regime 2, while XIV is significantly more sensitive to TVIX in regime 2 than in regime 1. For Exchange-Traded Funds (ETFs), which hold the underlying assets they track, the study finds very little variation in causality between regimes 1 and 2. This research contributes additional granularity to the literature on VIX ETPs and futures. Let us know what you think in the comments below or in the discussion forum. References [1] Michael O’Neill and Gulasekaran Rajaguru, On the analysis of time-varying causality between VIX exchange-traded products and VIX futures contracts in high and low volatility regimes, Journal of Accounting Literature, 2024 Article Source Here: Causal Relationship Between VIX ETPs and Futures in Low- and High-Volatility Regimes via Harbourfront Technologies - Feed https://ift.tt/KhjXsR1 November 04, 2024 at 04:51PM

[brainmassfinance]

WALL STREET FEAR GAUGE IN RECORD RETREAT AFTER LAST WEEK'S MASSIVE SPIKE

Wall Street’s most-watched gauge of investor anxiety is continuing its speedy retreat from panic levels, suggesting that investors may be returning to strategies that bank on low stock volatility despite a near-meltdown in equities early this month.⁠ ⁠ The Cboe Volatility Index (^VIX) slipped to 16.31 on Wednesday, its lowest level since the beginning of the month. The index hit 65 on Aug. 5 and closed at a four-year high of 38.57 on that day as investors roiled markets by unwinding several massive positions such as the yen-funded carry trade.⁠ ⁠ If the index's level holds into the close, the seven trading sessions it took the VIX to return to its long-term median of 17.6 will be the index’s quickest ever drop from 35, a level associated with a high degree of fear. Similar reversions in the so-called fear gauge have, on average, taken 170 sessions to play out, according to a Reuters analysis.⁠ ⁠ Some options mavens believe the rapid retreat in the so-called fear gauge signals investors have returned to strategies that bank on markets remaining calm to deliver profits. Among those is the dispersion trade, in which investors seek to take advantage of the difference between index-level volatility and volatility in single stock options, analysts said.⁠ ⁠ ✍️: Reuters