After a record-long streak without a 5% pullback in the S&P 500, the US equity markets lazy post-election boat ride was violently disrupted this week when a confluence of fears – including the showdown over the FISA memo, an optimistic average hourly wage number and anxieties about rising interest rates – sent markets spiraling lower, with the S&P 500 and the Dow recording their worst daily drop since August 2011, when Standard & Poor’s stripped the US of its AAA credit rating.
The violent moves have caused tremendous losses destroying inverse VIX ETPs in the process.
So with their stock tanking, the executives at CBOE are holding a phone call at 4:30 ET with journalists to explain how this is just a temporary speed bump, everything is still awesome and that retail investors who piled into those assets were aware of the risks they were taking.
Of the two major options exchanges, the Cboe is the most heavily dependent on selling products tied to the VIX – which it created.
A KBW report released this morning showed 20% to 25% of Cboe’s revenues come from VIX-related products, according to David Lutz of Jones Trading.
“The concerns are that this could impact CBOE’s VIX’s volumes,” said Richard Ripetto, an analyst at Sandler O’Neill + Partners.
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