VIX Call Buyers Fail to Strike While the Iron's Hot

CBOE Volatility Index (VIX) call volume is near annual-low levels, despite declining implied volatility (IV)

Feb 29, 2016 at 2:10 PM
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Amid a recent rebound in the broader equities market, strategists at JPMorgan Securities said it would be advantageous for speculative players to increase their hedges via out-of-the-money CBOE Volatility Index (VIX) calls, given the decline in implied volatility (IV). With the S&P 500 Index (SPX) set to close out the month of February with a 0.5% gain -- and head into a historically bullish month -- 30-day at-the-money IV on VIX futures options is docked at 75%, in the low 31st percentile of its annual range.

Today, VIX calls have a healthy lead over puts, but call volume is running at half the level typically seen at this point in the day. What's more, with 150,298 VIX calls on the tape at last check, total call volume is on track to arrive below four-fifths of all comparable readings taken in the past year.

Drilling down on the front-month series, peak call open interest of 491,777 contracts is found at the VIX March 30 strike. In fact, this strike contains the largest amount of open interest of any VIX option, with nearly 69,000 contracts added in the past 10 sessions alone.

On the charts, VIX has struggled against the 30 mark -- which represents roughly double its December lows. Year-to-date, the market's "fear gauge" has only toppled this round-number mark three times on an intraday basis, and has yet to notch a daily close north of here. Today, the CBOE Volatility Index (VIX) is up 0.3% at 19.86, despite an up day in the stock market.


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