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 http://www.cboe.com/GVZ. 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 www.cboe.com/skew 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 http://www.cboe.com/data/volatilityindexes/Default.aspx 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 www.cboe.com/EquityVIX for further information.

h/t themos mitsos

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Oh regional Indian's picture

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

it is a sign...



Bob's picture

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

Oh regional Indian's picture

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

Sure feels like it.


Bob's picture

Frequencies are rising no matter how you look at it.

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?

Thomas's picture

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

Bob's picture

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

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!

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.



stickyfingers's picture

I miss just betting on black or red.

johnnymustardseed's picture

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

Quinvarius's picture

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

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.

DiverCity's picture

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

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?

-1Delta's picture

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

adonisdemilo's picture

another paper scam now

another disaster soon

another bail out shortly


Math Man's picture

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

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.

tmosley's picture

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

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.


RockyRacoon's picture

Paper gold... good luck with that.

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.)

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.

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?

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.

jackpagan's picture

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

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

RockyRacoon's picture

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

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.

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!

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.

ziggy59's picture

Distraction Faction, is where the Action is