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What is volatility index (VIX)?

The Chicago Board Options Exchange’s (CBOE) Volatility Index is commonly known as the VIX. It is a popular measure of stock market volatility.
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The Chicago Board Options Exchange’s (CBOE) Volatility Index (INDEXCBOE: VIX) is commonly known as the VIX, which is also its ticker symbol. It is a popular measure of the stock market’s expectation of volatility based on options activity in the S&P 500 index (SPX).

The VIX is a financial benchmark operating in real-time. It gives investors an indication of volatility expectations in the market for the coming 30 days.

CBOE and Goldman Sachs updated the VIX Index in 2003. This incorporated a new way to measure expected volatility based on the S&P 500 Index.

Often alluded to as the ‘fear gauge’ on Bloomberg TV, CNBC, and CNN/Money, the VIX is regularly mentioned in the media and discussed among financial professionals.

What is volatility?

Volatility is extreme price fluctuations in the market. Volatile markets are often the most profitable, making them attractive to traders. However, volatility also increases risk.

For instance, the potential for particularly sharp retracements dissuades some traders from taking part in an extremely volatile market because the risk for losses is high.

The VIX offers a window into the state of volatility in the markets, which can help investors gauge the level of fear, risk, or stress in the market.

Having an idea of the volatility in relation to a steady market helps investors in their investment decisions.

Traders use the VIX to help turn their understanding of volatility to their advantage.


Introduced in 1993, the VIX is now the leading benchmark for US stock market volatility.


How is the VIX calculated?

In 2014, the VIX was enhanced once again to include a series of SPX Weeklys. A third of all SPX options traded are Weeklys, at close to 350k contracts a day. This update ensured a new level of precision in matching the 30-day timeframe the VIX represents.

The CBOE Volatility Index is calculated using standard SPX options and weekly SPX options with Friday expirations.

The reason for Friday Options is to act as a barometer. SPX Options expire on the third Friday of each month, while the Weekly SPX Options expire on the remaining Fridays.

These SPX options with Friday expirations are weighted to yield a constant maturity 30-day measure of the expected volatility of the S&P 500 Index.

Only SPX options with more than 23 days and less than 37 days to the Friday SPX expiration are used in the calculation.

The VIX is calculated by using the midpoint of the real-time bid/ask quotations of SPX options. With this knowledge, it considers the level of volatility in the upcoming 30 days. That makes the VIX a forward-looking measure rather than historical.

VIX Index values are often described as indicative or spot values. That’s because they are based on intraday snapshots of SPX option bid/ask quotes. These are captured every 15-seconds.

The CBOE calculates the VIX Index values between set times.

  • CBOE Global Trading Hours (GTH) Session: 3:15 a.m. ET and 9:15 a.m. ET
  • CBOE Regular Trading Hours (RTH) Session: 9:30 a.m. ET and 4:15 p.m. ET

The CBOE VIX White Paper sets out its VIX Index formula calculation and details its history.

VIX Index Calculation

How is the VIX Index used?

Traders find the VIX Index helpful in managing risk, which helps guide their investment decisions.

Historically, a high VIX reflects increased investor fear, and a low VIX suggests contentment. For this reason, it can be a useful tool in predicting bull and bear cycles.

As can be seen in this historical chart, the VIX traded above 80 in 2008 when market fear went parabolic.

VIX Volatity Index Chart All time
VIX Volatility Index Chart – Source: Yahoo Finance

Investors begin to worry when the VIX is approaching or trading above 20. Below 20 is less concerning.

For much of 2019, the VIX traded below 15. Market fear then shot up around March 2020 as the Covid-19 pandemic was making itself known. At this point, the VIX once again briefly exceeded 80. However, for most of 2020, it traded around the 20-mark.

VIX Volatility Index
VIX Volatility Index 5-year chart – Source: Yahoo Finance

CBOE: Master of volatility

The VIX Index is not the only CBOE volatility index. The CBOE also calculates volatility over 9-day, 3-month, 6-month, and 1-year periods, among others:

  1. The CBOE Short Term Volatility Index (VIX9DSM), reflecting the 9-day expected volatility of the S&P 500 Index.
  2. CBOE S&P 500 3-Month Volatility Index (VIX3MSM)
  3. The CBOE S&P 500 6-Month Volatility Index (VIX6MSM)
  4. The CBOE S&P 500 1-Year Volatility Index (VIX1YSM)
  5. The Nasdaq-100 Volatility Index (VXNSM)
  6. CBOE DJIA Volatility Index (VXDSM)
  7. The CBOE Russell 2000 Volatility Index (RVXSM)

Can you buy the VIX?

The S&P 500 Index and other stock market indices are made up of a portfolio of stocks. Therefore the price of the index is based on the return percentage of each constituent.

For instance, an index containing three stocks would work like this. If Stock A has risen 25%, Stock B has risen 15%, and Stock C has risen 20%, the index price would be up 20%, or (25 + 15 + 20)/3.

But the price of the VIX Index varies on a constantly changing portfolio of SPX options. These change on a minute-by-minute basis, so it can’t be bought by stock market investors or traders.

Nevertheless, the VIX Index settlement process is tradable, and those interested can buy Volatility Derivatives.

Although the prices of Volatility Derivatives are linked to SPX options, individually, their valuations expire at various points along the term structure. Therefore, these reflect constantly changing portfolios of SPX options.

Plus, investors and traders have no way of knowing which SPX calls and puts will be out-of-the-money on a future date. But SPX options expiry dates are known, along with the VIX Index formula for a given date, so that traders can estimate the price of the VIX Index. This helps drive VIX futures and options prices.

Buying VIX Futures and Options

VIX Futures are traded on the CBOE Futures Exchange (CFE), while VIX options are traded on the CBOE Options. Both standard and weekly Volatility Derivatives can be bought on either exchange.

A final settlement value for VIX futures and VIX options is revealed on the morning of their expiration date (usually a Wednesday). This is calculated through a Special Opening Quotation (“SOQ”) of the VIX Index.

However, the SOQ of the VIX Index differs from the calculation of the VIX Index at all other times.

The SOQ calculation uses SPX options or SPXW (warrant) options from a single expiration of 30 calendar days in the future. But it does not account for the interruption of volatility calculated with near-term and next-term options.

The strike range of an SOQ calculation also differs from that of the VIX Index calculation at other times.

To determine the strike range of the SOQ calculation, options with consecutive strikes do not have to have zero bid prices, which they do in calculating the VIX Index at other times.

CBOE Options uses an algorithm to detect the call with the highest strike and the put with the lowest strike to be used in the SOQ calculation.

Where’s the value?

  • The CBOE VIX operates in real-time showing market expectations for volatility in the next 30 days.
  • Traders and investors use the VIX as an indication of risk, fear, and stress in the market. It helps their trading decisions.
  • It is possible to trade the VIX using derivatives. Standard and weekly Volatility Derivatives can be bought as Options and Futures.

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Homes listed for sale in early June sell for $7,700 more

New Zillow research suggests the spring home shopping season may see a second wave this summer if mortgage rates fall
The post Homes listed for sale in…

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  • A Zillow analysis of 2023 home sales finds homes listed in the first two weeks of June sold for 2.3% more. 
  • The best time to list a home for sale is a month later than it was in 2019, likely driven by mortgage rates.
  • The best time to list can be as early as the second half of February in San Francisco, and as late as the first half of July in New York and Philadelphia. 

Spring home sellers looking to maximize their sale price may want to wait it out and list their home for sale in the first half of June. A new Zillow® analysis of 2023 sales found that homes listed in the first two weeks of June sold for 2.3% more, a $7,700 boost on a typical U.S. home.  

The best time to list consistently had been early May in the years leading up to the pandemic. The shift to June suggests mortgage rates are strongly influencing demand on top of the usual seasonality that brings buyers to the market in the spring. This home-shopping season is poised to follow a similar pattern as that in 2023, with the potential for a second wave if the Federal Reserve lowers interest rates midyear or later. 

The 2.3% sale price premium registered last June followed the first spring in more than 15 years with mortgage rates over 6% on a 30-year fixed-rate loan. The high rates put home buyers on the back foot, and as rates continued upward through May, they were still reassessing and less likely to bid boldly. In June, however, rates pulled back a little from 6.79% to 6.67%, which likely presented an opportunity for determined buyers heading into summer. More buyers understood their market position and could afford to transact, boosting competition and sale prices.

The old logic was that sellers could earn a premium by listing in late spring, when search activity hit its peak. Now, with persistently low inventory, mortgage rate fluctuations make their own seasonality. First-time home buyers who are on the edge of qualifying for a home loan may dip in and out of the market, depending on what’s happening with rates. It is almost certain the Federal Reserve will push back any interest-rate cuts to mid-2024 at the earliest. If mortgage rates follow, that could bring another surge of buyers later this year.

Mortgage rates have been impacting affordability and sale prices since they began rising rapidly two years ago. In 2022, sellers nationwide saw the highest sale premium when they listed their home in late March, right before rates barreled past 5% and continued climbing. 

Zillow’s research finds the best time to list can vary widely by metropolitan area. In 2023, it was as early as the second half of February in San Francisco, and as late as the first half of July in New York. Thirty of the top 35 largest metro areas saw for-sale listings command the highest sale prices between May and early July last year. 

Zillow also found a wide range in the sale price premiums associated with homes listed during those peak periods. At the hottest time of the year in San Jose, homes sold for 5.5% more, a $88,000 boost on a typical home. Meanwhile, homes in San Antonio sold for 1.9% more during that same time period.  

 

Metropolitan Area Best Time to List Price Premium Dollar Boost
United States First half of June 2.3% $7,700
New York, NY First half of July 2.4% $15,500
Los Angeles, CA First half of May 4.1% $39,300
Chicago, IL First half of June 2.8% $8,800
Dallas, TX First half of June 2.5% $9,200
Houston, TX Second half of April 2.0% $6,200
Washington, DC Second half of June 2.2% $12,700
Philadelphia, PA First half of July 2.4% $8,200
Miami, FL First half of June 2.3% $12,900
Atlanta, GA Second half of June 2.3% $8,700
Boston, MA Second half of May 3.5% $23,600
Phoenix, AZ First half of June 3.2% $14,700
San Francisco, CA Second half of February 4.2% $50,300
Riverside, CA First half of May 2.7% $15,600
Detroit, MI First half of July 3.3% $7,900
Seattle, WA First half of June 4.3% $31,500
Minneapolis, MN Second half of May 3.7% $13,400
San Diego, CA Second half of April 3.1% $29,600
Tampa, FL Second half of June 2.1% $8,000
Denver, CO Second half of May 2.9% $16,900
Baltimore, MD First half of July 2.2% $8,200
St. Louis, MO First half of June 2.9% $7,000
Orlando, FL First half of June 2.2% $8,700
Charlotte, NC Second half of May 3.0% $11,000
San Antonio, TX First half of June 1.9% $5,400
Portland, OR Second half of April 2.6% $14,300
Sacramento, CA First half of June 3.2% $17,900
Pittsburgh, PA Second half of June 2.3% $4,700
Cincinnati, OH Second half of April 2.7% $7,500
Austin, TX Second half of May 2.8% $12,600
Las Vegas, NV First half of June 3.4% $14,600
Kansas City, MO Second half of May 2.5% $7,300
Columbus, OH Second half of June 3.3% $10,400
Indianapolis, IN First half of July 3.0% $8,100
Cleveland, OH First half of July  3.4% $7,400
San Jose, CA First half of June 5.5% $88,400

 

The post Homes listed for sale in early June sell for $7,700 more appeared first on Zillow Research.

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Government

Survey Shows Declining Concerns Among Americans About COVID-19

Survey Shows Declining Concerns Among Americans About COVID-19

A new survey reveals that only 20% of Americans view covid-19 as "a major threat"…

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Survey Shows Declining Concerns Among Americans About COVID-19

A new survey reveals that only 20% of Americans view covid-19 as "a major threat" to the health of the US population - a sharp decline from a high of 67% in July 2020.

(SARMDY/Shutterstock)

What's more, the Pew Research Center survey conducted from Feb. 7 to Feb. 11 showed that just 10% of Americans are concerned that they will  catch the disease and require hospitalization.

"This data represents a low ebb of public concern about the virus that reached its height in the summer and fall of 2020, when as many as two-thirds of Americans viewed COVID-19 as a major threat to public health," reads the report, which was published March 7.

According to the survey, half of the participants understand the significance of researchers and healthcare providers in understanding and treating long COVID - however 27% of participants consider this issue less important, while 22% of Americans are unaware of long COVID.

What's more, while Democrats were far more worried than Republicans in the past, that gap has narrowed significantly.

"In the pandemic’s first year, Democrats were routinely about 40 points more likely than Republicans to view the coronavirus as a major threat to the health of the U.S. population. This gap has waned as overall levels of concern have fallen," reads the report.

More via the Epoch Times;

The survey found that three in ten Democrats under 50 have received an updated COVID-19 vaccine, compared with 66 percent of Democrats ages 65 and older.

Moreover, 66 percent of Democrats ages 65 and older have received the updated COVID-19 vaccine, while only 24 percent of Republicans ages 65 and older have done so.

“This 42-point partisan gap is much wider now than at other points since the start of the outbreak. For instance, in August 2021, 93 percent of older Democrats and 78 percent of older Republicans said they had received all the shots needed to be fully vaccinated (a 15-point gap),” it noted.

COVID-19 No Longer an Emergency

The U.S. Centers for Disease Control and Prevention (CDC) recently issued its updated recommendations for the virus, which no longer require people to stay home for five days after testing positive for COVID-19.

The updated guidance recommends that people who contracted a respiratory virus stay home, and they can resume normal activities when their symptoms improve overall and their fever subsides for 24 hours without medication.

“We still must use the commonsense solutions we know work to protect ourselves and others from serious illness from respiratory viruses, this includes vaccination, treatment, and staying home when we get sick,” CDC director Dr. Mandy Cohen said in a statement.

The CDC said that while the virus remains a threat, it is now less likely to cause severe illness because of widespread immunity and improved tools to prevent and treat the disease.

Importantly, states and countries that have already adjusted recommended isolation times have not seen increased hospitalizations or deaths related to COVID-19,” it stated.

The federal government suspended its free at-home COVID-19 test program on March 8, according to a website set up by the government, following a decrease in COVID-19-related hospitalizations.

According to the CDC, hospitalization rates for COVID-19 and influenza diseases remain “elevated” but are decreasing in some parts of the United States.

Tyler Durden Sun, 03/10/2024 - 22:45

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Rand Paul Teases Senate GOP Leader Run – Musk Says “I Would Support”

Rand Paul Teases Senate GOP Leader Run – Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump…

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Rand Paul Teases Senate GOP Leader Run - Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump into the race to become the next Senate GOP leader, and Elon Musk was quick to support the idea. Republicans must find a successor for periodically malfunctioning Mitch McConnell, who recently announced he'll step down in November, though intending to keep his Senate seat until his term ends in January 2027, when he'd be within weeks of turning 86. 

So far, the announced field consists of two quintessential establishment types: John Cornyn of Texas and John Thune of South Dakota. While John Barrasso's name had been thrown around as one of "The Three Johns" considered top contenders, the Wyoming senator on Tuesday said he'll instead seek the number two slot as party whip. 

Paul used X to tease his potential bid for the position which -- if the GOP takes back the upper chamber in November -- could graduate from Minority Leader to Majority Leader. He started by telling his 5.1 million followers he'd had lots of people asking him about his interest in running...

...then followed up with a poll in which he predictably annihilated Cornyn and Thune, taking a 96% share as of Friday night, with the other two below 2% each. 

Elon Musk was quick to back the idea of Paul as GOP leader, while daring Cornyn and Thune to follow Paul's lead by throwing their names out for consideration by the Twitter-verse X-verse. 

Paul has been a stalwart opponent of security-state mass surveillance, foreign interventionism -- to include shoveling billions of dollars into the proxy war in Ukraine -- and out-of-control spending in general. He demonstrated the latter passion on the Senate floor this week as he ridiculed the latest kick-the-can spending package:   

In February, Paul used Senate rules to force his colleagues into a grueling Super Bowl weekend of votes, as he worked to derail a $95 billion foreign aid bill. "I think we should stay here as long as it takes,” said Paul. “If it takes a week or a month, I’ll force them to stay here to discuss why they think the border of Ukraine is more important than the US border.”

Don't expect a Majority Leader Paul to ditch the filibuster -- he's been a hardy user of the legislative delay tactic. In 2013, he spoke for 13 hours to fight the nomination of John Brennan as CIA director. In 2015, he orated for 10-and-a-half-hours to oppose extension of the Patriot Act

Rand Paul amid his 10 1/2 hour filibuster in 2015

Among the general public, Paul is probably best known as Capitol Hill's chief tormentor of Dr. Anthony Fauci, who was director of the National Institute of Allergy and Infectious Disease during the Covid-19 pandemic. Paul says the evidence indicates the virus emerged from China's Wuhan Institute of Virology. He's accused Fauci and other members of the US government public health apparatus of evading questions about their funding of the Chinese lab's "gain of function" research, which takes natural viruses and morphs them into something more dangerous. Paul has pointedly said that Fauci committed perjury in congressional hearings and that he belongs in jail "without question."   

Musk is neither the only nor the first noteworthy figure to back Paul for party leader. Just hours after McConnell announced his upcoming step-down from leadership, independent 2024 presidential candidate Robert F. Kennedy, Jr voiced his support: 

In a testament to the extent to which the establishment recoils at the libertarian-minded Paul, mainstream media outlets -- which have been quick to report on other developments in the majority leader race -- pretended not to notice that Paul had signaled his interest in the job. More than 24 hours after Paul's test-the-waters tweet-fest began, not a single major outlet had brought it to the attention of their audience. 

That may be his strongest endorsement yet. 

Tyler Durden Sun, 03/10/2024 - 20:25

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