A large slug of option contracts tied to the Cboe Volatility Index are set to expire on Wednesday, which could potentially amplify stock-market volatility on...
A large slug of option contracts tied to the Cboe Volatility Index are set to expire on Wednesday, which could potentially amplify stock-market volatility after the Federal Reserve releases its latest decision on interest rates, several analysts said.
Better known as “the Vix,” or Wall Street’s “fear gauge,” the Vix VIX attempts to reflect how volatile option traders expect the S&P 500 index to be over the coming month. A bullish bet on the Vix typically pays off when the S&P 500 SPX falls. A rebound in U.S. stock prices over the past week drove the Vix back to 21.38 on Tuesday, its lowest end-of-day level since stress in the U.S. banking sector began earlier this month.
The last time a Wednesday Vix option expiration coincided with a Fed rate-hike decision was Sept. 21, when the central bank hiked its policy rate by 75 basis points, its third “jumbo” rate hike in a row. The S&P 500 fell 1.7% that day, according to FactSet data. Trading in Vix calls has surged in recent weeks as the volatility gauge climbed to its highest level of the year amid the fallout from the collapse of Silicon Valley Bank and two other U.S. lenders, according to data from SpotGamma.
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