Tagged: arbitrage; Total Intramonth Volatility (TIV); VIX; volatility; CBOE

Volatility Implications

Like a billboard reading, “Illiterate? Write for free help,” record demand for VIX futures in a market nearly devoid of volatility seems at best paradoxical and perhaps idiotic. But it’s a touchstone for institutional behavior now.

“The VIX” is the Chicago Board Options Exchange’s index of implied monthly volatility in the S&P 500 index. It’s called the Fear Gauge because ebbs and flows signal waxing and waning market uncertainty.

There are 34 different Exchange Traded Products (ETP) providing risk managers and traders variations on the VIX volatility theme. Record levels of ETP shares outstanding, according to an article yesterday in Traders Magazine, denotes extreme demand for volatility products. (more…)