If you hold a position larger than a specified threshold in a futures or options contract that is regulated by the CFTC, your clearing firm must report it and classify your position as either commercial or non-commercial (I prefer the clarity of the old “hedging vs speculative” language, but whatever). Futures traders have been tracking these reports for years, but I’m not aware of any studies that analyze the history of VIX futures commitments, with the exception of a comment…
One average of the volume of contracts traded in VIX futures recently exceeded the level observed during the financial crisis of 2008, indicating that sophisticated traders and investors may be preparing for an end to the recent run-up in equity prices. The chart below shows the volume of trading in VIX futures (VX) since January 2008, along with a 20-day simple moving average of that volume; as evident there, the average volume in recent weeks is greater than at any…
Volatility Tracker for the week of October 26, 2009
As I’ve noted on many occasions here, the relationship between spot VIX and longer-dated VIX estimates has not “worked” as a directional indicator for at least several months. [7,8] This looks like a genuine puzzle: the premium VIX futures traders are willing to pay and/or requiring in order to sell is too steep and has been too persistent to be dismissed as a phenomenon typical of the “wall of worry” that bull…
It seems these days that the entire world is gasping at, of all things, minor twitches in out-month VIX futures. Earlier this week, Bloomberg’s strength ebbed and I caught them as, overcome, they whisper’d, “VIX Signals S&P 500 Swoon as September Approaches.” Like any financial headline that calls to mind men in breeches and whooping cough, this one should be regarded with skepticism. In the first place, VIX futures are signaling no such thing: even if the VIX popped up…
For several weeks now in our Volatility Tracker we’ve noted the persistence of a premium in longer-dated VIX futures versus the front-month contract and especially the spot VIX. Historically, divergences like these have resolved in favor of the futures price rather than the spot VIX price, which has tended to correlate with a decline in the S&P 500.
Clearly, those tendencies haven’t held up in this case. The market has rallied relentlessly, VIX has continued its steady decline, and the relative premium…
Thursday, January 28, 2010
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