First Half 2014 Volatility Trading Review

Transcription

1 Interactive Brokers Webcast First Half 2014 Volatility Trading Review July 16, 2014 Presented by Russell Rhoads, CFA

2 Disclosure Statement Options involve risks and are not suitable for all investors. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Copies are available from your broker, by calling OPTIONS, or from The Options Clearing Corporation at Futures trading is not suitable for all investors and involves risk of loss. The information in this presentation is provided solely for general education and information purposes. No statement within this presentation should be construed as a recommendation to buy or sell a security or future or to provide investment advice. Any strategies discussed, including examples using actual securities or futures price data, are strictly for illustrative and educational purposes only. In order to simplify the computations, commissions, fees, margin interest and taxes have not been included in the examples used in this presentation. These costs will impact the outcome of all transactions and must be considered prior to entering into any transactions. Multiple leg strategies involve multiple commission charges. Investors should consult with their tax advisors to determine how the profit and loss on any particular option strategy will be taxed. Past performance does not guarantee future results. Supporting documentation for any claims, comparisons, statistics or other technical data in this presentation is available from CBOE upon request. The CBOE Volatility Index (VIX index) methodology is the property of Chicago Board Options Exchange, Incorporated (CBOE). CBOE, Chicago Board Options Exchange, CBOE Volatility Index, Execute Success and VIX are registered trademarks and CBOE Short-Term Volatility Index, GVZ, OVX, RVX, The Options Institute, VXEEM, VXEWZ, VXST and VXN are service marks of CBOE. CBOE and its affiliates do not sponsor, endorse, sell or promote any third party investment product that is or may be based on the VIX Index. CBOE and its affiliates make no representation regarding the advisability of investing in such products. S&P 500 is a registered trademark of Standard & Poor's Financial Services, LLC and has been licensed for use by CBOE and CBOE Futures Exchange, LLC (CFE). Financial products based on S&P indices are not sponsored, endorsed, sold or promoted by S&P and S&P makes no representation regarding the advisability of investing in such products. Russell 2000 is a registered trademark of Russell Investments, used under license. The NASDAQ-100 Index, NASDAQ-100, and NASDAQ are trademark or service marks of The NASDAQ Stock Market, Inc. (with which its affiliates are the "Corporations"). These marks are licensed for use by CBOE in connection with the trading of products based on the NASDAQ-100 Index. The products have not been passed on by the Corporations as to their legality or suitability. The products are not issued, endorsed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT(S). CBOE is not affiliated with Interactive Brokers. This presentation should not be construed as an endorsement or an indication by CBOE of the value of any non-cboe product or service described in this presentation. Copyright 2014 CBOE. All rights reserved. THE OPTIONS INSTITUTE at CBOE 2

3 1H 2014 Volatility Trading Review Outline Tradable Indexes VIX ETPs First Half Trading Examples VIX Futures Calendar Spread Trading THE OPTIONS INSTITUTE at CBOE 3

4 CBOE Volatility Index 1H 2014 Price Action VIX vs. S&P S&P VIX Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Data Sources: CBOE & Bloomberg THE OPTIONS INSTITUTE at CBOE 4

5 CBOE Volatility Index 1H 2014 in Context VIX Statistics H2014 Average High Low H / L Range H/L Percent Range S&P % 8.99% % 3.00% % 13.62% % 3.53% % % % 23.45% % 12.78% % 0.00% % 13.41% % 29.60% 2014* % 6.05% Data Sources: CBOE & Bloomberg THE OPTIONS INSTITUTE at CBOE 5

6 CBOE Volatility Index 1H 2014 in Context Average Daily VIX Option Volume by Month 900, ,000 Feb , , , , , , , ,000 0 Feb-06 Jan-07 Dec-07 Nov-08 Oct-09 Sep-10 Aug-11 Jul-12 Jun-13 May-14 Data Sources: CBOE & Bloomberg THE OPTIONS INSTITUTE at CBOE 6

7 CBOE Volatility Index 1H 2014 in Context VIX Option Average Daily Volume by Year Avg. Daily Year Volume , , , , , , , ,403 1H ,385 1H2014 Average is 21% Higher than 2013 THE OPTIONS INSTITUTE at CBOE 7

8 CBOE Volatility Index 1H 2014 in Context Average Daily VIX Futures Volume by Month Feb , Mar-04 Jun-05 Sep-06 Dec-07 Mar-09 Jun-10 Sep-11 Dec-12 Mar-14 Data Sources: CBOE & Bloomberg THE OPTIONS INSTITUTE at CBOE 8

9 CBOE Short-Term Volatility Index SM 1H 2014 Price Action VXST SM vs. S&P S&P VXST Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Data Sources: CBOE & Bloomberg THE OPTIONS INSTITUTE at CBOE 9

10 CBOE Short-Term Volatility Index 1H 2014 in Context VXST Statistics H2014 Average High Low H/L Range H/L Percent Range S&P % 0.00% % 13.41% % 29.60% 2014* % 6.05% THE OPTIONS INSTITUTE at CBOE 10

11 CBOE Russell 2000 Volatility Index SM 1H 2014 Price Action RVX SM vs. Russell Russell RVX Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Data Sources: CBOE & Bloomberg THE OPTIONS INSTITUTE at CBOE 11

12 CBOE Russell 2000 Volatility Index 1H 2014 in Context RVX Statistics H 2014 Average High Low H / L Range H/L Percent Range Russell % 17.00% % 3.32% % 17.00% % -2.75% % % % 25.22% % 25.31% % -5.45% % 14.63% % 37.00% 1H % 1.16% Data Sources: CBOE & Bloomberg THE OPTIONS INSTITUTE at CBOE 12

13 CBOE NASDAQ-100 Volatility Index 1H 2014 in Context VXN SM vs. NASDAQ-100 SM 4000 NASDAQ VXN Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Data Sources: CBOE & Bloomberg THE OPTIONS INSTITUTE at CBOE 13

14 CBOE NASDAQ-100 Volatility Index 1H 2014 in Context VXN Statistics H 2014 Average High Low H / L Range H/L Percent Range NASDAQ % 10.44% % 1.49% % 6.79% % 18.67% % % % 53.54% % 19.22% % 2.70% % 16.82% % 34.99% 1H % 7.17% Data Sources: CBOE & Bloomberg THE OPTIONS INSTITUTE at CBOE 14

15 CBOE Emerging Markets ETF Volatility Index SM 1H 2014 Price Action VXEEM SM vs. EEM EEM VXEEM Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Data Sources: CBOE & Bloomberg THE OPTIONS INSTITUTE at CBOE 15

16 CBOE Emerging Markets ETF Volatility Index 1Q 2014 in Context VXEEM Statistics 2011* 1H 2014 Average High Low H / L Range H/L Percent Range EEM 2011* % % % 19.06% % -3.65% 1H % 4.24% THE OPTIONS INSTITUTE at CBOE 16

17 CBOE Brazil ETF Volatility Index SM 1H 2014 Price Action VXEWZ SM vs. EWZ EWZ VXEWZ Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Data Sources: CBOE & Bloomberg THE OPTIONS INSTITUTE at CBOE 17

18 CBOE Brazil ETF Volatility Index 1H 2014 in Context VXEWZ Statistics 2011* 1H 2014 Average High Low H / L Range H/L Percent Range EWZ 2011* % % % 0.36% % % 1H % 9.06% THE OPTIONS INSTITUTE at CBOE 18

19 CBOE Gold ETF Volatility Index 1H 2014 Price Action GVZ SM vs. GLD GLD GVZ Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Data Sources: CBOE & Bloomberg THE OPTIONS INSTITUTE at CBOE 19

20 CBOE Gold ETF Volatility Index 1H 2014 in Context GVZ Statistics 2008* 1H 2014 Average High Low H / L Range H/L Percent Range GLD 2008* % -0.41% % 24.03% % 29.27% % 9.57% % 6.60% % % 1H % 10.27% THE OPTIONS INSTITUTE at CBOE 20

21 CBOE Crude Oil ETF Volatility Index 1H 2014 Price Action OVX SM vs. USO USO OVX Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Data Sources: CBOE & Bloomberg THE OPTIONS INSTITUTE at CBOE 21

22 CBOE Crude Oil ETF Volatility Index 1H 2014 in Context OVX Statistics 2007* 2014 Average High Low H / L Range H/L Percent Range USO 2007* % 57.34% % % % 18.67% % -0.71% % -2.28% % % % 5.84% 2H % 10.08% THE OPTIONS INSTITUTE at CBOE 22

23 VIX Related Exchange Traded Products 1H 2014 Performance Selected ETP Performance Long VIX ETPs Ticker 12/31/2013 6/30/2014 Change % Change ipath S&P 500 VIX ST Futures ETN VXX % ipath S&P 500 VIX MT Futures ETN VXZ % VelocityShares Daily 2x VIX ST ETN TVIX % ProShares VIX Short-Term Futures ETF VIXY % VelocityShares Long VIX ST ETN VIIX % ProShares Ultra VIX Short Term Fut ETF UVXY % Short VIX ETPs Velocity Shares Daily Inverse VIX ST ETN XIV % ProShares Short VIX Short Term Fut ETF SVXY % Low Volatility Funds ishares MSCO Emerging Mkt Min Vol Index EEMV % ishares MSCI USA Min Volatility USMV % PowerShares S&P 500 Low Volatility Portfolio SPLV % Data Sources: CBOE & Bloomberg THE OPTIONS INSTITUTE at CBOE 23

24 VIX Related Exchange Traded Products 1H 2014 Performance in Context Selected ETP Performance Long VIX ETPs Ticker 2013 Performance 1H 2014 Performance ipath S&P 500 VIX ST Futures ETN VXX % % ipath S&P 500 VIX MT Futures ETN VXZ % % VelocityShares Daily 2x VIX ST ETN TVIX % % ProShares VIX Short-Term Futures ETF VIXY % % VelocityShares Log VIX ST ETN VIIX % % ProShares Ultra VIX Short Term Fut ETF UVXY % % Short VIX ETPs Velocity Shares Daily Inverse VIX ST ETN XIV % 30.83% ProShares Short VIX Short Term Fut ETF SVXY % 30.83% Low Volatility Funds ishares MSCO Emerging Mkt Min Vol Index EEMV -1.29% 3.11% ishares MSCI USA Min Volatility USMV 25.09% 4.85% PowerShares S&P 500 Low Volatility Portfolio SPLV 23.13% 7.33% Data Sources: CBOE & Bloomberg THE OPTIONS INSTITUTE at CBOE 24

25 Trading Examples Bullish Spread March 7, Buy 1 Mar Sell 1 Mar Net Cost = 0.32 THE OPTIONS INSTITUTE at CBOE 25

26 Trading Examples Bullish Spread Payoff Diagram THE OPTIONS INSTITUTE at CBOE 26

27 Trading Examples Bearish Spread July 3, Buy 1 VIX Jul Sell 1 VIX Jul Net Cost = 0.13 THE OPTIONS INSTITUTE at CBOE 27

28 Trading Examples Bearish Spread Payoff Diagram THE OPTIONS INSTITUTE at CBOE 28

29 Trading Examples Neutral Spread May 21, Sell 1 VIX Jun Sell 1 VIX Jun Buy 1 VIX Jun Net Credit = 1.59 THE OPTIONS INSTITUTE at CBOE 29

30 Trading Examples Neutral Spread Payoff Diagram THE OPTIONS INSTITUTE at CBOE 30

31 VIX Calendar Spreads Quote Example July / August Futures Quotes Bid Size Bid Ask Ask Size July VIX August VIX Market Order Sell 1 July Buy 1 August However, there is an alternative. THE OPTIONS INSTITUTE at CBOE 31

32 VIX Calendar Spreads Quote Example July / August Futures Quotes Bid Size Bid Ask Ask Size July VIX August VIX Aug / Jul VIX Spread Orders Sell August / Buy 0.92 (0.85) Sell July / Buy 0.93 (0.95) Check with your brokerage firm regarding spread quotes THE OPTIONS INSTITUTE at CBOE 32

33 Summary Volatility in has been pretty quiet The CBOE Russell 2000 Volatility index has maintained a premium relative to VIX and VXN this year Oil and the Brazilian market are the only two volatility indexes to show elevated levels this year Long exposure has come mostly through low cost spreads rhoads@cboe.com THE OPTIONS INSTITUTE at CBOE 33