Political turmoil in Washington sends CBOE Fear Index soaring.
The CBOE VIX (NYSEARCA:VXX) experienced a dramatic rise on Wednesday as political turmoil in Washington quickly spread through the financial markets.
The Chicago Board Options Exchange (CBOE) Volatility Index spiked 46.4% to 15.59, its highest settlement in a month. With the gain, the VIX has all but erased its year-to-date losses.
The outlook on the VIX remains largely bearish, although Wednesday’s gain clearly signaled that the fear trade was back in vogue. Relative strength is in the high-60s. The MACD, while still negative, appears to be turning higher.
The S&P 500 Index (NYSEARCA:SPY) closed down 1.8% on Wednesday.
Major VIX ETFs:
iPath S&P 500 VIX Short Term Futures ETN: (NYSEARCA:VXX) Designed to offer exposure to the S&P 500 VIX Short Term Futures Index Total Return. The Index uses CBOE Volatility Index futures by way of a long position in the first and second month VIX Futures contracts. VXX advanced 18.4%.
VelocityShares Daily Inverse VIX Short Term Futures ETN: (NYSEARCA:XIV) Designed to track the inverse daily performance of the S&P 500 VIX Short Term Futures Index. XIV declined 17.8%.
ProShares Ultra Short Term VIX Futures: (NYSEARCA:UVXY) UVXY is designed to deliver 2X (leveraged) returns of the day’s moves in the S&P 500 VIX Short Term Futures Index. It tacks the two front months of the futures contract. UVXY advanced 36.3%.
VelocityShares Daily Short Term VIX Futures ETN (NYSEARCA:TVIX) TVIX is a leveraged VIX ETN designed to deliver 2X the returns of the daily S&P 500 Short Term Futures Index. TVIX advanced 35.9%.
The Final Word: The market’s reaction on Wednesday is the clearest signal yet that politics is doing most of the talking.