Volatility Remains Subdued
U.S. stock market volatility remains subdued whilst positioning in VIX-linked ETF Products suggests significant bets on higher volatility, equity derivatives strategist at JP Morgan note.
VIX ETP’s vega exposure remains significantly long and continues to be primarily retail investor driven, JPM equity derivatives strategist Bram Kaplan said in a note. Vega is the measurement of an option’s sensitivity to changes in the volatility of the underlying asset, vega represents the amount that an option contract’s price changes in reaction to a 1% change in the implied volatility of the underlying asset.
Investors poured about $400 mln into inverse funds betting on a pullback in the VIX after its spike on May 17th, VIX ETP vega exposure remains significantly long. 13-F filings for the end of Mar, indicate institutional investors’ held less than 20 pct of the net vega exposure of long positions in VIX ETPs, Kaplan says. “This suggests retail investors continued to hold the majority of the net long vega position in VIX ETPs,”
VIX up 0.14 pts to 10.24; the index rose to a six-month high of 16.30 on May 18 before retreating back to current levels having previously spent a number of days below 10. The VIX index reached a low of 9.77 in the week ending 12th May, the lowest level reached since 1993.