The VIX closed today in the mid 60’s. Incredible…
I thought the VIX was a measurement of market oscillation? Meaning that the more back and forth the market traded the higher value for the index. Yesterday, the market was all over the place, started down 300 then went up to +200 to fall to -200 to rally again to +150 only to end -180 down yet the VIX remained fairly flat. Is it more a measure of daily deviation, start to end? Does it also use a 10 or 30 day rolling average?
It an incredibly complicated calculation. A simple (but incorrect) way to think about it is a weighted average of near term, near the money implied volatilities of SPX options.
JoeyDVivre Wrote: ------------------------------------------------------- > Incredibly complicated in 2 pages > http://www.cboe.com/micro/vix/vixwhite.pdf Really good white paper - I like it.
So the index is significantly higher than has ever been recorded correct? We are in uncharted territory? http://finance.yahoo.com/echarts?s=^VIX#chart1:symbol=^vix;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
we are making history!
we are history!
Looks like I was wrong. I think we are setting records for having such a high VIX for a long period of time, but it has been higher before. http://www.bloomberg.com/apps/news?pid=20601087&sid=aNsOyMOaLwM8&refer=home 10/9/2008: “The VXO Volatility Index, a predecessor to the VIX that reflects the price of using options on the S&P 100, added 12 percent to 75.96. Following the October 1987 stock-market crash, it got as high as 172.79.”
Yeah, but that was different. Prior to '87, lots of people used these dynamic portfolio hedging strategies which didn’t work at all during the crash. There were huge breaks between futures markets and cash and in general the whole infrastructure of the markets just got messed. Options represented some kind of insurance against faulty infrastructure as well as market vol.
Gotcha. So that was an outlier and not really relevant. So the price of insurance purely against market volatility is higher now than ever before.
I don’t know about that… It’s just that it’s hard to compare option prices from twenty years ago to option prices now.
Bump: reverse this threat towards the low. Pick up some options today
What trade are you going to put on, and what is your PnL if SPX realizes 7% like it has over the past year?
Man, JDV - the good days
VIX loving this 9 and change single digit status.