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Insights
January 2021 Market Recap
Tuesday, February 9, 2021
Despite advancing 2.73% from the start of the
year through January 25, the S&P 500® Index declined 1.01% for
the month. Growing concerns over the deteriorating prospects for a sizable
economic stimulus package paired with volatility caused by investor speculation
in stocks with high levels of short interest drove the S&P 500® Index
to a decline of 3.64% over the last four trading days of the month.
Macroeconomic data released in January reflected
a pause from recent positive trends. The first estimate of Gross Domestic
Product for the fourth quarter of 2020 showed that the U.S. grew at an
annualized rate of 4.0%, slightly below the consensus expectation. The
unemployment rate held at 6.7% from November to December, barely behind the consensus
expectation, while the participation rate remained at 61.5%. The December
Consumer Price Index, released on January 13, showed a 1.4% year-over-year
increase, slightly above the consensus estimate. With 36% of companies
reporting, fourth quarter aggregate operating earnings were on track to decline
1.62% quarter-over-quarter and 22.75% year-over-year. More than 84% of the
companies that have reported earnings met or exceeded analyst estimates.
Implied volatility, as measured by the Cboe®
Volatility Index (the VIX®), averaged 24.91 in January. Consistent
with its normal relationship, average implied volatility exceeded realized
volatility, as measured by the standard deviation of daily returns for the
S&P 500® Index, which was 17.05% for the month. The VIX®
opened the month at 26.97, dipping to its intra-month low of 21.32 on January
21 during the equity market advance. As the market declined at the end of
January, the VIX® reached an intra-month high of 37.21 on January 27
before closing the month at 33.09. The VIX® remained above its
historical average of 19.49 throughout the month.
Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Source: Bloomberg, L.P.
The Cboe®
S&P 500 BuyWriteSM Index1 (the BXMSM) advanced 0.11% in January, outperforming
the S&P 500® Index by 112 basis points (bps). On the third Friday
of each month, the BXMSM writes a new index call option as the
option it wrote the previous month expires. The premiums the BXMSM
collects on its written index call options have significant influence on its
return potential during market advances and help to mitigate market declines. Outperformance
relative to the S&P 500® Index in January was primarily due to
the downside protection provided by the premium collected when writing a new
index call option upon the BXM’sSM January index call option
expiration. From the beginning of the month through January 14, the BXMSM
returned 0.85%, underperforming the 1.12% return of the S&P 500®
Index by 27 bps. On January 15, the BXMSM wrote a new index call
option with a February expiration and collected a premium of 2.44% as a
percentage of the BXM’sSM underlying value. From its closing value
on January 14 through month end, the BXMSM declined 0.73% while the
S&P 500® Index declined 2.10%.
The Bloomberg Barclays U.S. Aggregate Bond Index
returned -0.72% in January. The yield on the 10-year U.S. Treasury Note (the
10-year) started January at its intra-month low of 0.91% before climbing to an
intra-month high of 1.15% on January 11. The yield on the 10-year closed the
month at 1.07%.
1The BXMSM is a passive total return index designed to track the performance of a hypothetical buy-write strategy on the S&P 500® Index. The construction methodology of the index includes buying an equity portfolio replicating the holdings of the S&P 500® Index and selling a single one-month S&P 500® Index call option with a strike price approximately at-the-money each month on the Friday of the standard index-option expiration cycle and holding that position until the next expiration.
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Categories
U.S. Market Recap
December 2021 Market Recap
November 2021 Market Recap
October 2021 Market Recap
September 2021 Market Recap
August 2021 Market Recap
July 2021 Market Recap
June 2021 Market Recap
May 2021 Market Recap
April 2021 Market Recap
March 2021 Market Recap
February 2021 Market Recap
January 2021 Market Recap
December 2020 Market Recap
November 2020 Market Recap
October 2020 Market Recap
September 2020 Market Recap
August 2020 Market Recap
July 2020 Market Recap
June 2020 Market Recap
May 2020 Market Recap
April 2020 Market Recap
March 2020 Market Recap
February 2020 Market Recap
January 2020 Market Recap
December 2019 Market Recap
November 2019 Market Recap
October 2019 Market Recap
Q3 2019 Market Recap
August 2019 Market Recap
July 2019 Market Recap
June 2019 Market Recap
May 2019 Market Recap
April 2019 Market Recap
U.S. Market Perspective
Too Much of a Good Thing?
Has the Federal Reserve Taper Already Impacted Vol
License to Kill (Portfolio Returns)
What Will Taper Do to Implied Volatility?
How Can Investors Benefit from Rich Volatility Ris
Volatility Is Where You Find It
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Volatility Pricing Indicates Market Expectations
A Multidimensional Volatility Environment
The Alternative to "There is No Alternative"
A Closer Look at Bond Market Performance
Familiar Factors Present as the VIX® Nears Record
Will Volatility Risk Premium Remain Attractive in
Lower, not Low: An Examination of Recent Implied V
October 2020 Market Perspective
September 2020 Market Perspective
August 2020 Market Perspective
July 2020 Market Perspective
June 2020 Market Perspective
May 2020 Market Perspective
April 2020 Market Perspective
March 2020 Market Perspective
February 2020 Market Perspective
January 2020 Market Perspective
December 2019 Market Perspective
November 2019 Market Perspective
October 2019 Market Perspective
Q3 2019 Market Perspective
August 2019 Market Perspective
July 2019 Market Perspective
June 2019 Market Perspective
May 2019 Market Perspective
April 2019 Market Perspective
Market Review
Active Overwrite Market Review – Q3 2021
Index/RA Market Review – Q3 2021
Active PutWrite Market Review – Q3 2021
Active PutWrite Market Review – Q2 2021
Active Overwrite Market Review – Q2 2021
Index/RA Market Review – Q2 2021
Active Overwrite Market Review – Q1 2021
Active PutWrite Market Review – Q1 2021
Index/RA Market Review – Q1 2021
Quick Takes
What Is Convexity Tail Hedging?
Is Low Volatility Low Risk?
An "All Clear" Signal?
An Update on the Volatility Risk Premium (VRP)
Should Election Year Volatility Concern Investors?
Flagship (Index/RA) Commentary
2021 Flagship (Index/RA) Commentary - Q3
2021 Flagship (Index/RA) Commentary - Q2
2021 Flagship (Index/RA) Commentary - Q1
2020 Flagship (Index/RA) Commentary - Q4
2020 Flagship (Index/RA) Commentary - Q3
2020 Flagship (Index/RA) Commentary - Q2
2020 Flagship (Index/RA) Commentary - Q1
2019 Flagship (Index/RA) Commentary - Q4
2019 Flagship (Index/RA) Commentary - Q3
2019 Flagship (Index/RA) Commentary - Q2
2019 Flagship (Index/RA) Commentary - Q1
Active Overwrite Commentary
2021 Active Overwrite Commentary - Q3
2021 Active Overwrite Commentary - Q2
2021 Active Overwrite Commentary - Q1
2020 Active Overwrite Commentary - Q4
2020 Active Overwrite Commentary - Q3
2020 Active Overwrite Commentary - Q2
2020 Active Overwrite Commentary - Q1
2019 Active Overwrite Commentary - Q4
2019 Active Overwrite Commentary - Q3
2019 Active Overwrite Commentary - Q2
2019 Active Overwrite Commentary - Q1
Active PutWrite Commentary
2021 Active PutWrite Commentary - Q3
2021 Active PutWrite Commentary - Q2
2021 Active PutWrite Commentary - Q1
2020 Active PutWrite Commentary - Q4
2020 Active PutWrite Commentary - Q3
2020 Active PutWrite Commentary - Q2
2020 Active PutWrite Commentary - Q1
2019 Active PutWrite Commentary - Q4
2019 Active PutWrite Commentary - Q3
2019 Active PutWrite Commentary - Q2
2019 Active PutWrite Commentary - Q1
2018 Active PutWrite Commentary - Q4
2018 Active PutWrite Commentary - Q3
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