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Esta um bom artigo sobre o VIX no Trading Markets escrito pelo Larry Connors que quanto a mim é o maior especialista nesta matéria. Já faz testes com o VIX há varios anos. O artigo tb está acessível via YahooFinance.

A Primer on the VIX Future, Part 2


By Paul Haber
Special to RealMoney.com
3/19/2004 12:00 PM EST

"In Part 1 of this primer, I dissected the Chicago Board Options Exchange's proposed strategies for using the new VIX future and illustrated some potential problems. However, that doesn't render the product completely useless. In fact, it can create some interesting opportunities for astute traders.
Here, I'll tackle some common questions about the VIX future and discuss five ways you can use it once it hits the market on March 26.

Can the future be used to gain pure implied volatility exposure?

Volatility traders (as opposed to directional traders) of S&P 500 index options derive profits from two components: a change in the implied volatility and realized volatility captured by hedging their positions. This future only calculates the change in forecast implied volatility and will not reflect any captured (realized) stock-price movement. This is a critical point to understand before considering this product's "pure implied volatility."

Implied volatility may be a large factor in long-dated options, but it's relatively insignificant in the front months used in the VIX. Realized volatility is the primary factor of profitability in front months. Front-month straddle buyers generally buy for the event, not the post-event change in implied volatility. Options held to expiration will only be profitable if the realized volatility is greater than the implied volatility initially paid -- or, put more simply, hedging profits will be greater than the price paid for the options. Investors buying the actual S&P 500 index options will be able to capture that movement while future buyers will not.

Can the future be used to hedge against short-term options positions?

VIX futures aren't a reliable hedge for this usage. Here's an extreme example of how the suggested hedge (short options, long future) could exacerbate losses. Last July 24, Roche acquired Igen International. Igen's stock price jumped from $37 to $59, while the implied volatility collapsed from 80 to 30. A trader selling an August 35 straddle for $6 would have lost about $18. Volatility decreased because the price of the acquisition was fixed, and the stock was now expected to be stable. Future buyers would not only fail to participate in the positive stock movement, but also lose money because the implied volatility fell. This type of loss is unpreventable with the future.

What's the correlation between the VIX and its future?

The VIX and the future are not very correlated and will trade independently of each other. If there are anticipated market-moving events in the next 30 days, the future will trade at a discount to the VIX. This is because the future will settle against next month's VIX, which will reflect post-event levels.

So how can I use the VIX future effectively?

Here are five possible ways:


Reduce nonfront-month vega exposure, but not gamma exposure.
Futures can be used to reduce vega risk before the anticipated event (target) month (i.e., short November options and long October future). However, if the event occurs before the future settlement date, you might lose on both sides of the trade.


Speculate on the level of implied volatility at a specific point in time.
Investors can use the future if they believe general volatility will increase after a quiet period.


Partially offset the vega of long-dated options and convertibles.
It can be used to partially reduce exposure without the transactional and operational costs of dynamically hedging a position. There is a term (time) mismatch, and it's not a highly correlated hedge.


Hedge volatility risk between announcement date and issuance date of a structured product.

Speculate purely on post-event changes in volatility without regard to the stock-price movement. For example, investors may believe implied volatility will decrease 5 points after a key Fed announcement, but do not want the exposure to a potentially adverse movement.
The uniqueness of this product will create some profitable situations. As with any launch of a new product, it will take some time for the VIX future to be properly priced. Understanding its strengths and weaknesses will provide an edge when it first opens for trading."

(in www.realmoney.com)

A Primer on the VIX Future, Part 1


By Paul Haber
Special to RealMoney.com
3/18/2004 12:00 PM EST

"On March 26, investors will be able to trade the VIX future, which will supposedly help them hedge the volatility risk of their portfolios. But the caveat "past performance is no guarantee of future performance" has never been more applicable than it is with this product.
The Chicago Board Options Exchange Volatility Index (VIX) is a leading measure of investor sentiment. VIX futures will trade under the symbol VX, and they will track the level of the Jumbo CBOE Volatility Index (VXB), which is 10 times the value of VIX. The contract size is 100 times the value of VXB. For example, a contract will cost $18,500 if the VIX is 18.5. The last trading day is the Tuesday prior to the third Friday of the month.

Several structural problems make the VIX future an unreliable hedging instrument. The Chicago Board Options Exchange suggests several strategies for using the new product, but examine them carefully before you start trading. CBOE.com suggests trading the new financial instrument for these purposes:


To take advantage of a market view on the direction of near-term volatility.


To hedge volatility risk.


To manage risks associated with the growing markets for volatility and variance swaps.


To take advantage of arbitrage opportunities between S&P 500 options and VIX futures and options.

I'll take you through each of these suggested uses and explain just why the VIX future might not be the right trading tool for you. I'll list each one and point out the potential problems.


To take advantage of a market view on near-term volatility.

First, there's a time mismatch between the VIX and the future. The VIX represents the market's expectation of 30-day volatility. On the other hand, the future is the market's expectation of next month's 30-day volatility. For example, April futures will settle on the third Wednesday of April. On that date, the VIX will represent the market expectation of May's volatility. So the future cannot be used for any front-month volatility views.


To hedge volatility risk.

The future can hedge non-front-month vega exposure, but not gamma risk. Realized volatility does not have a high correlation to forecast implied volatility.

The future will not profit from the actual movement of the index, except to the extent that forecast implied volatility increases. At best, it can protect a trader who is short two-month or longer options from vega risk until the options become front-month. (As an example, that's a long April future vs. short May options.) Vega measures the rate of change in an option's price for a one-unit change in the implied volatility.

Traders will always be exposed to adverse movement in the underlying index (gamma risk). Short gamma positions can never be hedged with this future.

To manage risks associated with the growing markets for volatility and variance swaps.

The VIX squared future will be an indication of the variance swap for next month. However, the VIX squared future won't settle for 30 days, so to hedge it accurately, you need to be long VIX squared future vs. short one-month options (or variance swap) and long two-month options (or variance swap). The option portfolio value will vary linearly with the VIX squared.


To take advantage of arbitrage opportunities between S&P 500 options and VIX futures.

There is no perfect correlation between S&P 500 options and futures for any arbitrage to exist. The closest relationship is long future vs. short one-month options and long two-month options. This position will have no vega exposure, but it will have a negative gamma. Additionally, as the market moves, you'll need to adjust the option weighting of the portfolio. Transaction costs combined with hedging error make this a difficult arbitrage to obtain.

In Part 2 of this primer, I'll dig a little deeper and find some potential uses for the VIX future. "

(in www.realmoney.com)

Vou aqui deixar dois artigos (um deles dividido em duas partes) muito interessantes sobre este novo contrato de futuros: como funciona, vantagens, desvantagens e possíveis estratégias.

Aqui fica o primeiro.

Um abraço,
Ulisses

Getting Excited About Volatility Futures

By Steven Smith
TheStreet.com Staff Reporter
3/24/2004 3:46 PM EST


The launch of one of the most highly anticipated financial products will take place Friday, when trading begins in the Chicago Board of Exchange's volatility futures. Although the concept of volatility-related investments is becoming more widely known, related products and trading has remained a domain occupied by a niche of professionals.

But as I discussed in a recent article, the important step was establishing volatility as a distinct asset class and making it widely accessible to the investing public.


While pros and hedge funds have been trading "variance contracts," these are mostly custom-made products where the transaction occurs "upstairs" between two willing parties. Volatility futures will be the first market that uses a true open-price discovery system.

A pair of articles last week by RealMoney contributor Paul Haber provided an excellent analysis of volatility index (VIX) futures. He not only discussed the futures' applications but exposed their limitations, including such intricacies as the ability to hedge front-month vega (the rate of change of an option's value relative to a change in volatility) but not gamma exposure (the rate of change of an option's value per unit change in the price of the underlying stock or index). It may also be useful to wade in from the shallow end of the pool and make sure we have a broad picture before it starts trading.


The Future is Now

The futures contract is based on the VIX index, which measures the implied volatility of 30-day options of the S&P 500 Index. However, it will be called the Jumbo CBOE Volatility Index (VXB) and will have a multiplier of 10 times the VIX and be worth $100 per point move. This means if the VIX is at 20, the VXB will be priced at 200 and have a total value of $20,000.

It also means that if the VIX rises 1 point to 21, the VXB's value will increase from 200 to 210, and one VXB futures contract will gain or lose $1,000 per 1-point move in the VIX. Be aware of the leverage involved with futures -- it cuts both ways.


The VXB will have quarterly expiration months of February, May, August and September, plus two near-term months. So it will launch with May and July also active. The contract expires on the Tuesday before the third Friday of the expiration month (three days before the underlying index options expire), and will be cash settled.


For One and All?

The VXB contract will be traded on the newly established Chicago Futures Exchange (CFE), so it will be necessary to open a futures account; it cannot be traded in an equity, option, 401(k) or any other type of account you may currently have open. But this isn't a tremendous obstacle. For the most part it simply requires depositing some money and acknowledging that you understand the risks involved.

As with all futures, you'll be in a margin account, which will most likely be subject to an initial 20% requirement (the VXB at 200 would mean about $4,000 required) and will be subject to maintenance margin rules based on mark-to-market closing valuations.

But this also may be something of an unanticipated marketing hurdle for the CBOE, as just 10% of retail investors currently have a futures account. Like anything, despite the hype and anticipation, it may take some time for the new product to gain some traction as people wait for it to build critical mass.


Making It Work

Although the futures represent your bet that volatility will rise or fall over a given time period, one of the most basic concepts for investors to grasp is that the VIX typically rises as the market declines. As a result, buying a VIX futures contract can be used as a protective hedge against an S&P 500 stock portfolio. (However, this highlights another nuance: the VXB futures may have discounted an imminent event and might not move in direct correlation with the VIX.) But unlike put options, which are bound by certain strike prices and have their value determined by the price of the underlying index, the value of the VXB doesn't directly correlate to the price of the S&P 500.

For example, a rise of 10% to 20% in the S&P 500 would greatly reduce the value of put options as they move further out of the money, greatly diminishing the protection provided. But the value of the VIX, and by extension the VXB, may only dip slightly throughout the index's climb. So when a decline occurs, your cost basis, or starting point for protection, may only be a few percentage points different than your purchase price.

A study published by Merrill Lynch showed that a simulated portfolio comprised of 10% VXB and 90% S&P 500 stocks would outperform the index every year since 1986 by 5%, while cutting the risk by 25%. Of course, this negative correlation works best when there is a dramatic drop in price. A slow, steady decline might not provoke a rise in implied volatilities, leaving the futures contract without any gains.


And this protection doesn't come without a cost.

Expect the futures to begin trading at a premium to the VIX because the index's current level -- at 20% -- is still near the low end of its historic range, with the growing perception that volatility is due to rise. Until there is enough acceptance of the product, I doubt many will be looking to short aggressively the futures given the current levels. If the futures initially are awarded a 10-point premium for the next month (210 in the VXB vs. 20 in the VIX) and nothing occurs to drive volatility higher when the contract expires and values converge, there will be a loss of $1,000 per contract.

Of course, this is a very basic overview of how the VXB might function and there will be plenty of nuances, quirks and implications to learn before it can be most efficiently applied and traded. We will watch and learn. "

(in www.realmoney.com)

http://www.cboe.com/OptProd/indexopts/vixfutures_spec.asp

um abraço