Tag Archives: VIX
Posted on 23. Mar, 2012 by Harvey Sax.
This is a good article explaining why these products don’t work. I’ve been railing against synthetic ETFS for some time. What I mean by synthetic is an instrument that tries to mimic an index or futures contract and is NOT actually the index or future itself. They just don’t work. In fact they fail miserably for the most part. It’s small wonder why many money managers fail because they opt out for lazy man macro decisions composing their client’s portfolios entirely from ETFs.
What Really Happened with TVIX
March 23rd at 9:33am by John Spence
TVIX Falls More After Credit Suisse Restarts Issuance
Institutional Investors Favor ETFs
Why a Volatility-Linked ETN is Diverging from the VIX
VelocityShares Daily 2x VIX Short-Term ETN (NYSEArca: TVIX) is in a two-day meltdown because the premium to net asset value is snapping back sharply after surging as high as 90% earlier in the week.
Posted on 27. Jan, 2012 by Kirk.
Guest post by: Kirk
Differentiating Between An Irrational Market Or Strong Bull Market Trend?
These past two weeks have been tough as an options trader. Differentiating between trading an a possibly irrational market or bull market trend is sometimes very difficult to assess. We all know that the stock market can push us to extremes and then, just when we “give up” and “give in” the turn happens.
Timing is really everything.
Blow-off Top or Pull-Back?
Most traders I talk to are in one of two schools of thought right now. Either you think this is the best shorting opportunity for the next 2 years or you are convinced that we are now in a new bull trend that could take the S&P 500 well above 1,500. It’s pretty much split down the middle honestly.
Whatever camp you are in there are some key stats that are glaring and cannot be brushed under the rug:
1) The VIX closed the week below 20 for the first time since last July.
2) S&P 500 is three standard deviation points above its 20-day moving average.
3) AAII Sentiment is near extreme levels at 47% Bullish compared to 29% Neutral and 23% Bearish.
4) S&P 500 contract short interest has declined nearly 32% – no more short squeeze?
Stick to Your Guns (And Indicators)
Will a top come soon? Maybe (hopefully) but who the heck knows right. I know I have been getting itchy to trade more as I’ve been mostly in cash for nearly a month now. Not that I don’t want to trade, but I think that better risk/reward ratios ratios will come soon and I’d rather have cash on hand to make those trades.
During bull market trend’s like this I find that keeping an eye on the indicators is best. They can and often stay over-bought for weeks but eventually they do break and divergence will be the early warning signals. Look for momentum indicators to drift lower even though the market will continue to move higher.
Posted on 05. Jan, 2012 by Harvey Sax.
Bracing for a Return of Volatility
By STEVEN M. SEARS | MORE ARTICLES BY AUTHOR
Savvy options traders are taking advantage of the subdued VIX to buy low-cost protection
On Thursday, the stock market sent investors a critical message. If you failed to hear it, you missed information that matters more than the mostly rosy prognostications for the stock market in 2012 from Wall Street banks.
The message: Volatile volatility is back from winter vacation, and likely here to stay for all of 2012.
Even though stocks surged higher on Tuesday, the first day of the trading year, and inched higher on Wednesday, Thursday’s initial decline in response to renewed European jitters and the resulting dollar surge suggest the market remains trapped in a volatility vortex that defined 2011.
Posted on 24. Aug, 2011 by Live Trading News.
TVIX, a measure of stock market volatility, fell 5% percent to 33. The VIX traded as high as 48 Aug. 8 after staying below 20 for much of the year.
VIX is the ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market’s expectation of stock market volatility over the next 30 day period. The VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the next 30-day period, which is then annualized. The VIX Index was introduced by Prof. Robert Whaley in 1993 while he was at Duke University. Prof. Whaley is now on faculty at Vanderbilt University.
Bank of America Corp. rose 8 percent, the most of any stock in the Dow average, after analysts said a four-day slide that erased 15 percent of the bank’s value had been overdone.
The Commerce Department reported that companies placed more orders for aircraft, automobiles and other durable goods in July. Orders for longer-lasting goods rose 4 percent, the biggest increase since March. They had dropped 1.3 percent in June. The report eased fears that the U.S. was headed for another recession.
Stock indexes jumped sharply Tuesday, as investors brushed off a pair of weak economic reports and an earthquake that shook the East Coast. Even after Tuesday’s rally the Dow is down 8 percent in August. The S&P 500 index has lost 11 percent, putting it on track for its worst August since 1998.
Wild swings have become commonplace this month after Europe’s debt crisis flared up again and as signs emerged that the U.S. might slip back into recession. The Dow has swung by more than 300 points seven days in August.
Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.
Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services
Posted on 21. Jun, 2011 by Live Trading News.
Are you watching the VIX?US Major Market Sentiment + The Bulls vs. Bears
Are you watching the VIX?
Last week as the market sold off ahead of Quad Witching options expiration we saw a jump in volatility, as the VIX along with the market broke the range.
The VIX has rallied to the mid-February high, and to the Gap Up mark in March. IMO as the VIX comes down the market may decide to rally.
1. VIX: 21.85; -0.88
2. VXN: 23.58; -0.89
3. VXO: 21.44; -0.53
4. Put/Call Ratio (CBOE): 1.19; +0.07. (12 sessions running above 1.0, Negative sentiment fuels bounces.
Bulls vs Bears
The Bulls are at 37.0% vs 40.9% last. And down 8 pts from 45.2% in 2 weeks. 35% is considered Bullish. They have quickly run back from the mark considered Bearish. Good to see fewer Bulls!
For your reference: To be seriously Bearish the Bulls must run up to the 60% to 65% mark.
The Bears are at 26.0% vs 22.6% last. They were at 20.4% 3 wks ago, and higher than 18.5% a month ago, and moving toward 23.1% at the start April. They were at 28.3% in September 2010, as the market pulled out of its basing and began this current rally.
For your reference: Bearishness hit a 5 year high at 54.4% the last week of October 2008. The move over 50 saw Bearish sentiment%2
Posted on 22. Apr, 2011 by David Spinowitz.
The VIX is pretty much color blind, it doesn’t differentiate between bullish or bearish activity. Simply put* If the market starts buying a bunch of calls (which is usually bullish), the VIX goes up…if the market starts buying a bunch of puts (which is usually a bearish trade), the VIX goes up. Over the past years it’s usually been a lot of put buying that drove the VIX higher and higher.
However now, people are using options much more as a capital enhancement tool and less as a capital preservations tool. Thus people are overwriting positions more than they ever have in the past. According to Denis Davitt (head of NY Options Trading)lately he has seen a ton of call selling in the options market. People are coming in and overwriting their calls and the markets been grinding at this steady pace into these long volatility positions. Basically everyone is long volatility. While VIX traded 14 today, (near 52 week low today & the difference between puts and calls is at a 4 yr high) that’s not necessarily a bullish indicator if anything it may be bearish because people are willing to pay up for puts relative to calls … click chart for a full size view>>>
The VIX index is a measure of 30 day implied volatility. The CBOE calculates the VIX as a weighted average of next term and near term S&P 500 option volatility. As volatility increases and decreases the number of options used in the VIX calculation expands and contracts, so the portfolio of options used to replicate the VIX is ever changing which makes the index non-investable. In order to *try* to replicate a long position in the VIX, you want to go long a representative portfolio of 2 month or less (preferably 30 day) puts and calls while delta-hedging the position daily. My suggestion was to delta hedge a simple straddle at the front month or the front two months of S&P 500 options. I deem that a sufficient replication for going long a representative version of the VIX. Will it follow the VIX exactly? No. But in trading I always tend to error on the side of simplicity.
*The many layers to the VIX can’t be simply put, for a deeper look check out the VIX White Paper below