A 3D View of the S&P 500: Price, Time, and Markets

There are lots of valid ways to look at the market.  Obviously, price is important, but a number alone (e.g., 1487.85—the Feb 25, 2013, S&P 500 close) doesn’t mean much.  Price related metrics like percentage changes and support/resistance levels add value, but adding time as a factor enables some really interesting measures like moving averages and momentum trackers.    My favorite time-related metric is term structure—how the …

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Computing Volatility Indexes With VIX Futures

Using the Cboe’s VIX futures historic data and interpolations/extrapolations for contracts that were not traded I developed a continuous time series for 7 months of VIX futures settlement values.   I then used that data, plus treasury bill data to compute the indexes that underly the popular long and short volatility Exchange Traded Products (ETPs) in the USA. This product includes two spreadsheets, one that …

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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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Barclays’ VXXB—Not as Short Term as You Think

In terms of assets Barclays’ “S&P 500 VIX Short-Term Futures” ETN is among the leaders in volatility ETFs with around 500 million dollars under management.   I suspect it’s also one of the leaders in investor confusion. Although VIX is in its formal name VXXB doesn’t actually track the CBOE’s VIX index with any degree of precision. In fact, it’s not unusual for VXXB and VIX to …

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Can Volatility ETFs & VIX Futures Blow-up the Stock Market?

The VIX Futures market has been on a bit of a tear—driven by inflows into volatility ETFs like Barclays’ VXX, VelocityShares’ XIV and TVIX, and ProShares’ UVXY.   The chart below shows the resultant growth in the short term futures open interest and volume. The data doesn’t look as dramatic if we change the vertical axis to a logarithmic scale—a scale that makes it easier to …

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