Short Term VIX Futures Growing 43% per Year—At Least

Last week the CBOE’s VIX futures set some new volume records.   While volume is interesting, I think the real story is the open interest of VIX futures contracts.  Is the volume just churn, or are VIX futures contracts being created or eliminated?   Since raw volatility is tough to buy, VIX futures market makers must buy other things, like SPX options to hedge the …

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So What if Volatility ETN/ETFs are Growing—Where are the Problems?

It’s clear that the volatility ETN/ETFs have begun to dominate the VIX Futures market.  What isn’t clear is whether it matters.  Volatility isn’t a commodity like gold or corn that is physically limited, so future position limits don’t seem applicable.  When the price of  VIX futures is attractive, more can be created—and appropriate hedges put in place.  But are these hedges distorting the overall market? …

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