Callie Bost Writes:
Options traders are confident U.S. equities will glide through December to their third straight yearly advance.
Speculators hold around the fewest options on the Chicago Board Options Exchange Volatility Index in more than two years, while trading in the contracts is the slowest since 2012, according to data compiled by Bloomberg. The Standard & Poor?s 500 Index has gained 12 percent this year to an all-time high, and has climbed for six Decembers (SPX) in a row, posting an average return of 2.2 percent.
Volume in options that appreciate as swings in the stock market widen shows investors aren?t convinced that the slump in oil prices, slowing growth overseas and an approaching federal budget deadline will roil U.S. equities, according to Dominic Salvino of Group One Trading LP.
?There are a lot of things that could affect this marketplace, but it doesn?t look like any of that?s going to play out tomorrow,? Salvino, a specialist on the CBOE floor for Group One Trading, the primary market maker for VIX options, said by phone Dec. 1. ?Excluding military action out of Russia, I don?t see any reasons for an immediate move.?
Traders purchase options on the VIX (VIX) as insurance against share losses because the volatility gauge typically rises as stocks fall. The VIX, a measure of S&P 500 options prices, has dropped 52 percent since Oct. 15, while the S&P 500 has climbed 11 percent during that period.
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