$VIX Ties Record, With Six Consecutive Closes < 10 (Preview)

By Lawrence G. McMillan

This week, there has been some publicity about the fact that $VIX is (or has?) set the record for consecutive closes below 10.  However, both articles that I saw (one by Bloomberg, one by Ryan Dietrich) cited “backdated” data that – while representative – wasn’t actually correct.  The only other time in history where $VIX closed below 10 for multiple days in a row occurred in December 1993.

At that time, the $VIX calculation involved 4 series of $OEX options (the most popular and liquid index option at the time).  That was the original $VIX calculation, and it was introduced earlier in 1993.  It persisted through 2003.  So, in December of 1993, the only $VIX calculation was that “original” $VIX.  Today, the symbol $VXO denotes that original $VIX calculation which is still being disseminated today.

In 2003, the $VIX calculation changed.  Instead of using four series of $OEX options, the calculation began to use two complete strips of monthly $SPX options. $SPX options had replaced $OEX as the most active index option.  Moreover, the use of the strips allowed the introduction of many, many strikes into the calculation – supposedly giving a better measure of implied volatility.  In reality, the original $VIX and the “new” $VIX of 2003 were quite similar...  

This excerpt was taken from the 7/21/17 edition of The Option Strategist Newsletter. Sign up today to read the full article.