STOCK MARKET WATCH -- Monday, 3 March 2014

[Ghost Dog]

21. VIX Traders Bet on Rising Volatility After Year of Calm: Options

Options (VIX) tied to gains in the benchmark gauge for American stock volatility reached the highest prices in six years last week, reflecting bets that the calm prevailing in equities for the last year won’t last.

A series of calls that appreciate in tandem with the Chicago Board Options Exchange Volatility Index climbed to the highest since May 2007 relative to puts, according to data compiled by Bloomberg. The increase reflects bets that swings measured by the VIX will widen this year after the Standard & Poor’s 500 Index rose 30 percent in 2013 without ever suffering a decline of 10 percent or more.

The intensifying standoff between Ukraine and Russia in the Crimea added to concerns facing global stock investors. U.S. equities completed a rebound last week from a selloff spurred by emerging-market turmoil that erased 5.8 percent between Jan. 15 and Feb. 3, the biggest retreat since June.

“Any time geopolitical risks escalate, especially in a major way -- and we’d say this is a major escalation and a major increase in risk -- you subject global stock markets to increased volatility,” Timothy Ghriskey, chief investment officer at New York-based Solaris Asset Management LLC, which manages about $1.5 billion in assets, said by phone yesterday. “The impact may end up being modest if the situation de-escalates, but right now there is no sign of that.” ...

/... http://www.bloomberg.com/news/2014-03-03/vix-traders-bet-on-rising-volatility-after-year-of-calm-options.html