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Volatility Monitor

"Rate Hike Cometh"

posted by CAPIS on 12/15/2015 at 8:00 am

by CAPIS

12/15/2015 at 8:00 am

So will this be the first rate hike since 2006? We’ll know for sure on December 16 at 2PM EST. According to the Fed funds futures market there is an 76% chance that the Fed will hike tomorrow. The SPX futures are up 13 points this morning as crude has moved slightly higher. The VIX futures are all lower this morning on the positive equity tone. The VIX futures term structure is fairly flat with only 2.5 points separating the whole curve.

Just browsing the sector ETFs, a few notables come to the forefront. XLE (Energy) 1M implied volatility is trading rich to 1M realized by 6.19 points. That’s a reading in the top 10% looking back 3 years. Utilities show a similar reading, in the top 7% of 3 year readings. One-month IV on a stand alone basis in the top 10% of 3-year readings across the board: XOP, XRT, XLU, XLK, XLB, XLI, XLV, XLF, XLP, and of course XLE. All of 3-month, 6-month, and 1-year IV disseminates the same thing. This all shouldn’t come as too much a shock given that the Russell 2000, S&P 500, and Q’s are all in the same boat.

After dropping 3.7% last week, the S&P 500 is finally getting some positive traction. The VIX moved up a bit more than you would have guessed, up 65%. The graph below shows the difference between 8 trading days ago and yesterday’s close for all the VIX futures. Quite a bump up, especially near term. Those front futures are already getting pounded before the open, however.

2015-12-15_7-34-17
2015-12-15_7-42-37
2015-12-15_7-43-24

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