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CBOE To Add Another Layer Of Gold Price Volatility, Launches Futures And Options On Gold VIX

Tyler Durden's picture


It's not quite a triple forward (or inverse) ETF on gold just yet, but it's a start. Capitalizing on the surge in volatility in the commodity space, which together with FX has become the go to arena for day traders seeking volatility, which has been completely eradicated from stocks courtesy of the Bernanke Put, the CBOE and CFE have "announced plans to launch futures and options on the CBOE Gold ETF Volatility Index (Ticker - GVZ). Pending regulatory approval, CBOE Futures Exchange (CFE) will begin trading GVZ futures on Friday, March 25, and CBOE will introduce GVZ options a few weeks later." The reason for this product to be pushed on investors is that after peaking near 25 in December, the ^GVZ has plunged to one year lows as gold has steadily remained just off its all time highs. So if the first volatility derivative isn't generating the much needed commission broker P&L, it is time to break out 2nd and further vol derivatives. We expect a triple or more-leveraged ETF on gold and silver to arrive shortly, then followed by an ETF which tracks the theta in the first ETF , and so forth, until the entire market is dominated by "synthetic CDO-like" derivatives and nobody cares about the actual underlying, just so traders have something to keep them occupied. After all diversion, is half the battle.

More from the CBOE:

The calculation of the CBOE Gold ETF Volatility Index ("Gold VIX") is based on the well-known CBOE VIX methodology applied to options on the SPDR Gold Trust  (Ticker - GLD).  The Gold VIX is an up-to-the-minute market estimate of the expected 30-day volatility of GLD, calculated using real-time bid/ask quotes of GLD options that are listed on CBOE.

"Each year we've added greater depth to our suite of volatility products," CBOE Holdings Chairman and CEO William J. Brodsky said. "Most recently we've extended the reach of our VIX methodology to new asset classes, including highly active commodity ETF options. With the addition of CBOE Gold ETF Volatility Index futures and options, market participants will have valuable products that will allow them to hedge volatility in a new way."

And here is how hard the CBOE is working to satisfy the dmands of all vol addicts out there:

Calculated and distributed by CBOE since 2008, the Gold VIX is one in a series of several VIX benchmarks created by CBOE.  CBOE also calculates the CBOE Crude Oil ETF Volatility Index (OVX) based on United States Oil Fund (USO) option prices; and the CBOE EuroCurrency ETF Volatility Index (EVZ) based on CurrencyShares Euro Trust (FXE) options.

For more information on CBOE Gold ETF Volatility Index futures and options, see CBOE, known as the home of volatility indexes, currently publishes data on more than a dozen different volatility-related benchmarks and strategies. CBOE has launched three additional initiatives in the volatility space since the beginning of the year:

  • On February 23, CBOE began publishing values for the CBOE S&P 500 Skew Index (ticker symbol: SKEW), a benchmark measure of the perceived risk of extreme negative moves -- often referred to as "tail risk" or a "black swan" event -- in U.S. equity markets. See for more information.
  • On January 14, CBOE launched a web page displaying CBOE Volatility Index (VIX) term structure data, calculated every 15 seconds throughout the trading day.  See for more information.
  • On January 7, CBOE began publishing volatility values on options of five highly active equities: Apple (ticker symbol: VXAPL), Amazon (ticker symbol: VXAZN), IBM (ticker symbol: VXIBM), Google (ticker symbol: VXGOG), and Goldman Sachs (ticker symbol: VXGS). See for further information.

h/t themos mitsos


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Mon, 02/28/2011 - 15:52 | 1004635 Oh regional Indian
Oh regional Indian's picture

I declare a blow-off top in arbitrage. The slices are getting finer and faster.

it is a sign...


Mon, 02/28/2011 - 15:56 | 1004652 Bob
Bob's picture

It's trending toward absolute harmonic resonance, I can feel it!

Mon, 02/28/2011 - 16:01 | 1004663 Oh regional Indian
Oh regional Indian's picture

Bob, not sure if you are serious or kidding, but really, everything spiking together.

Sure feels like it.


Mon, 02/28/2011 - 16:12 | 1004704 Bob
Bob's picture

Frequencies are rising no matter how you look at it.

Mon, 02/28/2011 - 17:40 | 1005006 boricuadigm-shift
boricuadigm-shift's picture

Do you know your Golden Greeks?


To the moon at Theta! :-)

Who needs the underlying anymore when you are Delta neutral?

Mon, 02/28/2011 - 17:11 | 1004910 Thomas
Thomas's picture

I thought CPDOs as well as squareds and cubes were pretty crazy.

Mon, 02/28/2011 - 15:55 | 1004642 Bob
Bob's picture

These boyz is on a roll now.  All in a dayz work, I guess.

Mon, 02/28/2011 - 22:31 | 1005758 RockyRacoon
RockyRacoon's picture

I'm all for it!  It has been crazy derivative stuff that has gotten us here.  More of the same will certainly hasten the end times.   Bring that garbage on!

Mon, 02/28/2011 - 15:56 | 1004648 Oh regional Indian
Oh regional Indian's picture

In another sign, in case some of you missed it (anyone affected here?):

GMail crash. Can you imagne losing all your primary e-mail?

Ponder that. Maybe back it up too, if you care.


Mon, 02/28/2011 - 16:07 | 1004678 stickyfingers
stickyfingers's picture

I miss just betting on black or red.

Mon, 02/28/2011 - 16:16 | 1004717 johnnymustardseed
johnnymustardseed's picture

Paper, paper, and more paper. Paper x3. World is fucked up

Mon, 02/28/2011 - 16:17 | 1004720 Quinvarius
Quinvarius's picture

Chinese people can't bury those under their huts for security.

Mon, 02/28/2011 - 16:20 | 1004740 johnnymustardseed
johnnymustardseed's picture

I guess it is just another way to deflate the value of something, create more fictional silver and gold. That gives the dollar a little longer life.

Mon, 02/28/2011 - 17:01 | 1004872 DiverCity
DiverCity's picture

Agreed.  Thereby resulting in a massively increased amount of dollar claims on a most finite amount of gold.

Mon, 02/28/2011 - 16:27 | 1004761 somethingelse
somethingelse's picture

complexity without functionality = distraction

Mon, 02/28/2011 - 16:33 | 1004777 Mercury
Mercury's picture

Now you have two new ways to play derivatives of an index of derivatives...

Does Cerberus have an opposite...a dog with three tails?

Mon, 02/28/2011 - 16:33 | 1004783 -1Delta
-1Delta's picture

honestly gold futures do not have enough liquidity for this shit to work out that well IMNSHO

Mon, 02/28/2011 - 16:33 | 1004785 adonisdemilo
adonisdemilo's picture

another paper scam now

another disaster soon

another bail out shortly


Mon, 02/28/2011 - 17:28 | 1004972 Math Man
Math Man's picture

So what do we think gold vol will be when it drops below $1000 later this year?

Mon, 02/28/2011 - 17:37 | 1005009 JNM
JNM's picture

I'm betting something similar to where it dropped $250 from $1000, I'd say 40% would be a good target, at least.

Mon, 02/28/2011 - 17:46 | 1005032 tmosley
tmosley's picture

How many angels can dance on the head of a pin?

Mon, 02/28/2011 - 18:10 | 1005123 JNM
JNM's picture

Why are you wondering about coreographing angels?

In other news, an IV target, is anything but useless to debate.  If my 45% target is correct, but gold climbs another 12% before dropping 10%, I have to sell my 2013 straddles at least 7 months before expiry to brake even.  If I am too conservative with the 45% IV target, I'll take profits too soon.  If I hold out waiting for 45%, and it never comes to fruition, I'll lose money.

Mon, 02/28/2011 - 22:39 | 1005769 RockyRacoon
RockyRacoon's picture

Paper gold... good luck with that.

Mon, 02/28/2011 - 18:05 | 1005106 Non Passaran
Non Passaran's picture

May I ask, are you net short gold?

If you aren't, then what's the point of raising the issue. If you are, let us know how much or to what extent. Otherwise it's difficult to take your posts seriously.

(I am very net-long gold and PM miners.)

Mon, 02/28/2011 - 18:18 | 1005139 JNM
JNM's picture

Were you asking Math Man, or me? I'm delta neutral, at the moment, if anybody cares.  I'm a buyer on the next dip if/when we get one.

Mon, 02/28/2011 - 22:41 | 1005772 RockyRacoon
RockyRacoon's picture

Buyer of... what exactly?   More paper gold?   I guess the upside is that you can eat it.  Not very nutritious, but edible.

Got real gold?

Mon, 02/28/2011 - 23:38 | 1005930 JNM
JNM's picture

Sorry, if I wasn't clear. On a dip, I am a buyer of physical gold.  Right now, I'm a buyer of paper gold volatility. 

For one to buy more paper gold, one would already have to own paper gold.  Myself, I don't own any paper gold.

I do own the right to buy paper gold, and I do own the right to put on somebody else, some paper gold.  I intend to sell those rights in the future, when there is more uncertainty with the price of paper gold.  Right now, I don't care where physical gold goes in price, I'm trading volatility on paper gold.

It's more liquid, and much more likely that implied volatility explodes higher on an instrument like GLD, compared to derivatives on the physical. More can go wrong, with paper gold.  That's why I'm long the volatility.

I think the trade has more upside, with lower risk, than buying either physical gold, or domestic equities right now. I'm talking, on a 3 to 6 month outlook.

Hope that clarifies things for you.  I'm curious if you concur, or if you want to further mock what makes markets.

Mon, 02/28/2011 - 19:18 | 1005324 jackpagan
jackpagan's picture

Ha ha Math Man...your posts are always good for a chuckle. Hows that 76 handle treating you?

Mon, 02/28/2011 - 20:35 | 1005505 Harmonious_Diss...
Harmonious_Dissonance's picture

Hey I'm starting to think Methman is right. Just look at that car! Has to be right driving that thing

Mon, 02/28/2011 - 22:41 | 1005776 RockyRacoon
RockyRacoon's picture

And the beach house.   Don't forget the beach house.

Mon, 02/28/2011 - 17:34 | 1004997 JNM
JNM's picture

I think the CBOE is ahead of the trade, but they have to be.  No way does an asset move like gold has over the last decade, then just stop on a dime.  Gold will get volatile in the years ahead.

I'm starting to accumulate 2013 volatility on Gold, via GLD straddles. Considering the shit that could hit the fan, volatility is the only thing I feel comfortable holding for more than 10 seconds.

Mon, 02/28/2011 - 18:06 | 1005111 Bull_Colapse
Bull_Colapse's picture


Mon, 02/28/2011 - 19:32 | 1005374 dwayne elizando
dwayne elizando's picture

Scott's Collectibles in Kalamazoo Michigan is sold out of silver eagles and silver bullion! Usually well stocked! They did have some proofs and junk silver!

Mon, 02/28/2011 - 20:35 | 1005502 chump666
chump666's picture

betting against gold ETF's without owning them...yeah i can dig it. wise business decision.  since the SPYDR trust should implode at some point.

Mon, 02/28/2011 - 21:20 | 1005600 ziggy59
ziggy59's picture

Distraction Faction, is where the Action is

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