The Turnaround in Emerging Markets and VXEEM

While I have a long way to go before I become the next Manny Mota, yesterday I was delighted to be able to pinch hit for Steve Sears of Barron’s for the twelfth time, when I penned Emerging Market Stocks: Have They Hit Bottom? as a guest columnist for The Striking Price.

In the Barron’s article I talk about how rapidly increasing uncertainty and risk in emerging markets during January was largely responsible for the 31.7% VIX spike on January 24, but was nowhere near the levels of June 2013, at least as measured by the CBOE Emerging Markets Volatility Index (VXEEM).

I also used the VXEEM:VIX ratio and some other data to support the idea that emerging markets have likely bottomed and are poised for a bounce. I concluded the Barron’s column with a couple of options trade ideas to take advantage of a reversal in emerging markets.

When I wrote the article, on Tuesday, my position on emerging markets was very much a case of going out on limb. By Friday’s publication date, which includes Tuesday’s option pricing data, emerging markets had already experienced a significant bounce and my emerging markets thesis no doubt sounded much less provocative than it would have three days earlier.

[source(s): StockCharts.com]

In any event, I strongly believe that emerging markets (EEM) and VXEEM bear close watching going forward, as the Fed moves toward a new policy direction, emerging markets grapple with rising interest rates in the U.S. and the global economic growth story has many critical ripple effects across the full emerging markets landscape.

Related posts:

• Watching Two Emerging Markets Currencies
• VXEEM as a Measure of Emerging Markets Volatility and Risk
• VXEEM vs. VIX Indices and Futures in Today’s Selloff
• Charting the Recent Decline of the BRIC Components
• The BRIC Bull
• Russia Leading the BRIC Rally
• BRIC Update: China a Leader or an Outlier?
• Time to Be Long China?
• When to Short China?
• Implied Volatility Over 150 in EWZ, the Brazil ETF
• Brazil Rallies While China Struggles
• Chart of the Week: Emerging Markets
• The Emerging Markets Engine
• A Global Indicator to Watch

A full list of my Barron’s contributions:

• Emerging Market Stocks: Have They Hit Bottom? (March 28, 2014)
• How to Spot Risk Early (July 16, 2013)
• How to Insure Your Stock Portfolio (April 18, 2013)
• The Case for Options Trading (January 2, 2013)
• Calm Down and Exploit Others’ Anxieties (November 14, 2012)
• How to Trade Options Around Volatile Events (July 10, 2012)
• Be Greedy While Others Are Fearful (May 3, 2012)
• Ways to Turn Volatility into an Asset Class (January 12, 2011)
• There’s Opportunity in Uncertainty (November 18, 2010)
• Will Market Volatility Return to Crisis Levels? (September 15, 2010)
• The Perils of Predicting Volatility (May 20, 2010)
• Take a Longer View on Volatility (July 2, 2009)

Disclosure(s): CBOE is an advertiser on VIX and More