September 29, 2014

Volatility Views 129: Juicing Up BuyWrites

58 minutes

Volatility Viewpoint: Today’s guest is Russell Rhoads, who is a senior instructor at CBOE’s Options Institute. He’s on to discuss a new white paper, A Leveraged Portfolio Management Approach Applying The CBOE S&P 500 2% OTM BuyWrite Index.

Summary: Historically, the CBOE S&P 500 2% OTM BuyWrite Index has outperformed the total return that would be expected from passively holding a market portfolio. This outperformance occurred on both an absolute and risk-adjusted basis. Additionally, a leveraged strategy that matches 120% of the expected performance of BXY may enhance this performance with a similar risk profile to the market portfolio.

Volatility Review: The week that was

VIX Cash - A relatively quiet week until an enormous pop on Thursday.

VIX Futures - further developments in VIX Futures term structure.

VIX Options - Hot Strikes: 326,209 VIX Oct-14 20 Calls, 296,305 VIX Oct-14 17 Calls & 290,453 VIX Nov-14 20.0 Calls.

VXST Options - On a day when VIX spikes 18%, there is still no interest in VXST.

RVX actually trading a bit on Thursday. Gold still skewing towards puts - Silver puts starting to catch a bid as well.

Crystal Ball: Brazilian elections. Could we see another India-like surge in VIX? Non-farms ahead.

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