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Volatility Spares VIX, Hits GLD and SLV

Fear Gauge prices OK but metal ETFs see big rise


It’s CBOE Volatility Index (CBOE: VIX) Expiration Day tomorrow (VIX-piration?). That means the May options and futures in VIX cash out on Wednesday’s opening settlement price. All sorts of individual stocks and commodities look incredibly ugly lately, but the volatility backdrop looks pretty … eh … right now.

Here’s the S&P 500 Index Options(CBOE: SPX) 30-day implied volatility vversus 20-day historical volatility.

Options have carried a pretty consistent four-to-five volatility-point premium over the volatility of SPX itself. Which is pretty much normal, especially with volatility in general at non-exceptional levels. So in other words, this recent ugliness under the surface has caused only a modest lift in historical volatility and a perfectly in-line lift in options premiums.

VIX futures haven’t moved much either. Here’s how the board looked on yesterday’s close.

Basically, VIX rose a bit, but futures barely budged. June now carries a scant .70 premium. What’s more, the curve is not particularly steep as the outer-month cycles carry under $5, down from premiums in the $7-$10 range.

It all says that there’s not a real “Fear” spike just yet in Big Cap stocks.

None of this would be at all interesting or noteworthy if we didn’t have volatility coursing through other asset classes. Hhistorical volatility in the SPDR Gold Trust (NYSE: GLD) has doubled in the past few weeks, albeit from a low base. The iShares Silver Trust (NYSE: SLV) volatility has quadrupled. What’s more, 10-Day HV in the iShares Russell 2000 Index (NYSE: IWM) has lifted from seven to 20 in the last month.

If you anticipate any of this spilling over into VIX World, the iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX) and the iPath S&P 500 VIX Mid-Term Futures ETN (NYSE: VXZ) look OK here.

With premiums muted in the VIX futures, VXX will not get plowed on Contango (rolling out to maintain 30-days duration). VXZ covers four-to-seven month VIX futures and thus does not have quite the same sensitivity to VIX moves, but with premiums out there muted it looks OK as well.

Follow Adam Warner on Twitter @agwarner.


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