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The CBOE Market Volatility Index (VIX) Hits a 6-Year High

The CBOE Market Volatility Index's (VIX) surge higher could influence the S&P 500 Index (SPX)

by Joe Sunderman (jsunderman@sir-inc.com) 9/29/2008 3:56 PM

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In the wake of U.S. legislators in the House of Representatives rejecting the government's $700-billion rescue plan, the Dow Jones Industrial Average (DJIA) plunged over 700 points in Monday's trading. Both the S&P 500 Index (SPX) and Nasdaq Composite (COMP) fell over 8%, respectively. Below is a table of the SPX's largest down days since 1950. Today's move (as of 3:30 PM EST) was the third-largest percentage drop in 58 years.

10 Biggest Percentage Down Days for the S&P 500

Amid this news, fear barometers shot through the roof. The CBOE Market Volatility Index (VIX) gained 37% to 47.81. The current VIX reading is the highest reading since July 2002.

Meanwhile, below is a table of the historical returns for the SPX following a spike of 30% or more in the VIX. A quick glance at the data shows that the next couple of weeks may be bumpy for the equities markets, with a more bullish tone coming in 25 to 50 days following such VIX action.

Historical returns for SPX following spike in VIX

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Options Stew: A Taste of the Week's Spiciest Plays

(11/20/2009 10:45:27 AM)

Welcome to our new video series, Options Stew, where we take a look back at what's been cookin' in the option pits this week. Join us as we sample just a few of the unusual option plays from the past week, with our "recipe" broken down into three unique segments:

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Schaeffer's Media Outtake: Thoughts on Hedging, Volatility

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"Standard & Poor's, the world's leading index provider, announced today the launch of the S&P 500 Dynamic VEQTOR Index which dynamically allocates between equity, volatility and cash to provide broad equity market exposure with an implied volatility hedge. 'Implied equity volatility typically has a strong negative correlation to equity market returns, and is considered a useful tool to hedge against the potential downside risk of the broad equity market,' says Liz Taxin, Director of Strategy Indices for S&P Indices. The S&P 500 Dynamic VEQTOR Index is comprised of three components: Equity, as represented by the S&P 500; Volatility, as represented by the S&P 500 Short-Term VIX Futures Index; and Cash, as represented by the Overnight LIBOR rate. The Index allocates between equity and volatility based on the combination of realized and implied volatility trend decision variables, and these allocations are evaluated on a daily basis."
(PR newswire � 11/18/09)

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Put Trading Swells on J. Crew Group Ahead of Earnings

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Retailers continue to line up for the earnings confessional, and one particular high-flyer is slated to release its quarterly report next week. J. Crew Group Inc. (JCG: sentiment, chart, options) is known for its preppy fashions, including jeans, khakis, and other basic (but often pricey) items sold to young professionals. J. Crew sells through its catalogs, Web sites, and some 300 retail and outlet stores in the U.S. under the J. Crew, crewcuts (for kids), and Madewell banners. Madewell, launched in 2006, is a women's-only collection of hip, casual clothes.

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Drug Delay Prompts Put Trading on ISIS Pharmaceuticals, Inc. (ISIS)

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Bearish option bettors have virtually blitzed ISIS Pharmaceuticals, Inc. (ISIS: sentiment, chart, options) today, with intraday put volume skyrocketing to nearly 38 times the norm. The pharmaceutical firm this morning confessed that it's delaying plans to seek approval for experimental drug mipomersen by nearly a year, from mid-2010 to mid-2011.

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Pre-Earnings Option Activity Accelerates on Sears Holdings Corporation

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Sears Holdings Corporation (SHLD: sentiment, chart, options) has been a hot topic on both sides of the options aisle today, as investors race to place their bets ahead of the retailer's looming turn on the earnings stage. According to Thomson Reuters, the firm is expected to report its third-quarter figures before the opening bell on Thursday, Nov. 19.

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Options Traders Bulk Up on Puts on Software Vendor

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Hopes Are Riding High for GameStop's Earnings

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Betting on a Short-Term Bounce for First Solar, Inc. (FSLR)

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Call traders have been fond of First Solar, Inc. (FSLR: sentiment, chart, options) today, despite the solar concern's retreat into the red. In afternoon trading, the security has already seen roughly 18,000 calls cross the tape � nearly tripling its average intraday volume of fewer than 6,250 contracts.

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The CBOE Market Volatility Index (VIX) Hits a 6-Year High

The CBOE Market Volatility Index's (VIX) surge higher could influence the S&P 500 Index (SPX)

by Joe Sunderman (jsunderman@sir-inc.com) 9/29/2008 3:56 PM

DJIA

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COMP

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