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12 November 2012

Volatility Trading Report: Insights into Volatility Exchange-Traded Products

VelocityShares is pleased to present the October 2012 Volatility Report, providing insights into the volatility landscape.

Highlights from this report include:

  • Year-to-Date Performance for the VIX Index is -21%.
  • Year-to-Date Performance for the S&P VIX Futures Indices:
    • Short-Term: -74% (SPVXSP)
    • Mid-Term: -47% (SPVXMP)
    • Tail Risk: -20% (SPVXTRSP)
  • VIX spot increased steadily in October, opening at 15.73 before closing the month at 18.40.
  • VIX Call Option Volume once again reached its second highest levels ever (and the most in over a year) on October 17th, 2012, nearing $850MM traded.
  • The Short-Term S&P 500 VIX Futures Tail Risk Index (SPVXTRSP) ended the month with a long-vol bias of 23.87% long, its greatest long exposure since June 2012.
  • Due to Hurricane Sandy, the stock exchange was closed for two days and reopened on October 31st. While a catastrophic event might be the cause of a spike in volatility, the following was observed:.
    • Short-Term VIX Futures gained 3.62%, which is within one standard deviation of the daily returns observed in October 2012
    • VIX Futures Dollar Volume on the 31st was greater than its 20-day moving average ($2.7B vs. $1.9B)
    • ETP Dollar Volume on the 31st was the same as its 20-day moving average ($1.4B each)
    • VIX Options Trading Volume on the 31st trailed its 20-day moving average (378K vs. 479K)

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