Volatility Brief – 12/22/16
News Trading Desk Volatility Monitor
Volatility Monitor
posted by CAPIS on 12/22/2016 at 11:16 am
by CAPIS on 12/22/2016
While the media sensationalized Dow 20,000, equity markets finished lower Wednesday: the S&500 index (SPX) closed lower -0.25% to 2,265.18, the Dow Jones Industrial (INDU) closed -0.16% to 19,941.96, and the Russell 2000 (RUT) closed -0.63% to 1,375.19. Volatility, as measured by the VIX , is at historic lows, considering the average for the index is around 20.00; however, there is nothing to indicate that volatility can’t remain below that level. It remains to be seen if hedgers will be sizable buyers of current lower priced volatility, and create a typical reversion to its mean. As the markets hover near all-time highs during the last weeks of the year, the CBOE S&P500 volatility index (VIX) traded at an intraday low of 10.93 and closed at 11.27. The CFE had 263,112 VIX futures trade yesterday and VIX options volume in the CBOE was 745,881 as VIX settled at 11.15. The VIX futures forward curve has remained steep (contango) where wider spreads between the front month volatility and back month volatility will cause spot VIX to typically track lower. Because of this curve structure, time decays have made it difficult to be on the long side of volatility during a relatively quiet…