Roller Coaster Week for VIX & VIX Options

Discussion in 'Wall St. News' started by archon, Jul 11, 2008.

  1. archon


    Roller Coaster Week for VIX & VIX Options

    This has been another roller coaster week for the CBOE Volatility Index (VIX).

    The VIX began the week hovering around 25. Monday's session saw a brief spike in the index. However, subsequent declines in crude oil prices, along with corresponding rallies in the broad market, caused a steep decline in the VIX. By midweek, the index had declined over 10% to 22.60.

    The VIX roller coaster took another turn on Wednesday as the downward trend quickly came to an end. Iranian missile tests sparked a new wave of concern over escalating tension in the Middle East. Continued saber rattling between Israel and Iran, along with renewed fears of a global economic slowdown, erased earlier market gains and sent the VIX rocketing skyward. The index regained all of its losses during the Wednesday session, leaving it nearly unchanged for the week.

    The looming specter of war in the Middle East wasn't the only thing ratcheting up the fear level in the market this week. The end of the week saw renewed attention on the housing market. Fannie Mae and Freddie Mac triggered a sharp sell off in the broad market over concerns that these firms lack the capital to weather the current housing slump.

    Rumors of a federal takeover of the two largest buyers of U.S. home loans sent the VIX soaring yet again. The index spiked to a high of 29.35 during Friday's session before finally closing at 27.51. Friday's session left the VIX with a gain of 10% percent on the week and a startling 22% percent gain from Wednesday's low.

    VIX Options Activity
    VIX options activity was extremely erratic during the past week. The wide range of movement in the underlying brought a correspondingly wide range of options strikes into play. The most active VIX option in the early sessions (7/7-7/10) was the July 32.5 call. This option traded 51,663 times with a slightly bullish bias on the week. The activity in this contract was strong despite the fact that it was over 30% out-of-the-money for most of the week...

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  2. Anyone taking bets on the VIX hitting 40 before the end of the month?