Convergence! Equity and Equity Volatility Markets both rise — DR Volatility recap 12.06.12


Despite the equity market’s gains as measured by the S&P 500 (SPX) Index, implied volatility rose, suggesting concern rising for the market ahead. While the convergence of the normally negatively correlated markets is not uncommon, neither indexes’ gains was insignificant lending value to the temporary correlation.

The CBOE Volatility Index® (VIX®), the SPX option derived measure of implied volatility, lifted 0.12 today to close at 16.58 while the underlying SPX index gained 4.66 to close at $1413.94,  up 0.33%.

Volatility rose across the time series with the front month December VIX future rising .30 to settle at 16.40 a discount to the shorter-term VIX Index, suggesting again concern of a short-term nature persists.

At the CFE today 87,693 VIX futures changed hands while at the CBOE 265,675 VIX option contracts traded, 0.51x the typical daily volume for the product. Calls made up 59.2% of the volume.

data sources: CFE, Trade-Alert LLC, Yahoo Finance and Differential Research LLC

The risk of loss in trading commodity futures and options is substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

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