VIX at 14-Month High to Futures on Fiscal Cliff Concern: Options

Nov. 13 (Bloomberg) -- The Chicago Board Options Exchange Volatility Index climbed to its highest level in a year compared with futures, a sign demand for protection against stock losses is intensifying as the so-called fiscal cliff approaches. The volatility gauge known as the VIX jumped 16 percent since its Oct. 5 low to 16.68 yesterday and reached the highest level since September 2011 relative to VIX one-month futures last week, data compiled by Bloomberg show. The index that tracks Standard & Poor’s 500 Index options prices slipped 29 percent this year as American shares gained the most since 2009. President Barack Obama’s victory has spurred the biggest swing in equity prices this year on concern his re-election sets up a budget showdown with the Republican-controlled House. Congress is scheduled to begin meeting today in an attempt to reach a deal to prevent $607 billion of spending reductions and tax increases that take effect automatically next year. “Reality has set into the market,” Scott Maidel, who helps oversee $152 billion as a money manager for equity derivatives at Russell Investments in Seattle, said yesterday in an interview. “Earnings, employment, Europe, the election and now the fiscal cliff have weighed on favorable Fed policy and rosy earnings seen earlier this year.” About $1 trillion was erased from global equity values in the two days after Obama prevailed over Mitt Romney, helping push the S&P 500 down 5.9 percent from its five-year high on Sept. 14. The decline has trimmed the 2012 increase in the gauge to 9.7 percent, an advance that has been fueled by Federal Reserve Chairman Ben S. Bernanke’s third round of asset purchases to stimulate growth and 10 straight quarters of earnings growth. Source: Bloomberg