Friday, May 11, 2007

Record VIX Futures Trading Yesterday

Yesterday the CBOE Futures Exchange established a new single day volume record for trading in VIX futures, with 12,102 contracts changing hands. The new record surpassed the previous record of 10,673 by 13.4%.

For those who wonder if new volume records for VIX futures may be significant, the old record stood for exactly seven months, having been established on October 10, 2006. In terms of historical context, the October 10 activity preceded a COT report that noted a substantial swing in the holdings of commercials from net long to net short. While commercials are generally considered to be the most savvy of the three groups in the COT report, the VIX did very little over the next 5 ½ months from October to late February, save drift slowly lower as volatility continued to compress.


Anonymous said...

Total VIX Novice:

Is there any truth to that saying that goes..."When the VIX is low it's time to go, when the Vix is high it's time to buy"?

Just wondering....thanks!

Adam in DC

Bill Luby said...

Hi Adam,

As a general rule, I'd say that a strategy that follows the saying you cite would do better than a strategy that tries to fade the saying. A couple of caveats are in order, though...

First, "time to buy" should be interpreted as going long equities, not the VIX derivatives.

Second, one needs to distinguish between relative values of the VIX (relative to a SMA or EMA, for instance) versus absolute values (i.e., "go long the markets when the VIX is over 40 and go short when the VIX is under 15" or something like that.) I think the relative high/low VIX play is a much better strategy than the absolute high/low play.

Third, much of the rationale for the saying you quote and VIX-related strategies in general depends upon the tendency of the VIX to revert to its mean. Check out all the posts with a 'mean reversion' label to learn more.

Finally, if you are interested in seeing some publicly disclosed strategies for trading the VIX itself, check out the third paragraph in my very first post on this blog.



Rod said...

Hi Bill,

Like to say you have a great blog. I have added it to my BlogRoll - if you fancy you could do the same for me please:



Anonymous said...

Many Thanks Bill!

I have read your posts on the "mean reversion"...I have been a silent fan of your blog for a few months now.

I was referring to equities, so I am glad to see that as a high-level plan the saying does hold.



Damian said...

Looking at the COT reports, I've had a hard time finding any value in them - have you found any use?

Robert L. said...

COT is one of those tools that, in my opinion, people either believe is worthless or they think that it is the holy grail of trading.

I think that it is somewhere in between. Looking at the COT for the VIX futures this afternoon, looks like Commercials added about a thousand net positions on the short side and the little guy remains long the VIX.

Not significant numbers to be sure, but it makes me think that the realm of 18-20 VIX anytime soon (even if for a brief period) isn't happening.

Rocko Chen said...

Nice blog. Do you know of anywhere with free VIX-Futures charting?

Bill Luby said...

Damian, I am still open-minded about the COT data, but I can't say that I have found any particular use for them vis-a-vis the VIX so far.

Rocko, for VIX futures charts, try the CFE for historical data (not charts). For current future prices and charts, I can get it through optionsXpress...though I suppose the charts are available anywhere you can trade a futures account. I don't trade futures, but you can get some ideas from ratings of direct access (and other) brokers at Elite Trader.

Let us know if you come up with a good source.

Bill Luby said...

rocko, try free VIX futures charts at

Bill Luby said...

VIX volume surges to a record 274,360 contracts again on 5/16

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