I see VIX is heading back towards pre-crisis levels.
http://uk.finance.yahoo.com/q?s=%5EVIX
VIX
And the SP500 is at its all time high.
I never really understood why "investors" associated Risk with Volatility until I saw VIX and SP500 plotted on the same graph (attached) and realized that when VIX was high there was bearishness in the market and vice-versa.
Is it obvious to see where the VIX & the market is headed next? Or is it a mis-conception to look at the past and extrapolate it in the future?
I never really understood why "investors" associated Risk with Volatility until I saw VIX and SP500 plotted on the same graph (attached) and realized that when VIX was high there was bearishness in the market and vice-versa.
Is it obvious to see where the VIX & the market is headed next? Or is it a mis-conception to look at the past and extrapolate it in the future?
You do not have the required permissions to view the files attached to this post.
- marksmeets302
- Posts: 527
- Joined: Thu Dec 10, 2009 4:37 pm
The VXX, an ETF that more or less tries to mimic the Vix index is a favorite short play for many people. It's easy money when the market is calm, then the vxx quietly erodes. But on days like yesterday it can wreak havoc on your portfolio. Looking at after hours trading in the VXX I expect many people have had their positions liquidated. I think you'll hear lots of stories of people gone bust in the coming days. Perhaps even the occasional broker that didn't manage their clients margin requirements properly.
Obscure security linked to stock volatility plummets 80% after hours, sparking worries of bigger market effect
https://www.cnbc.com/2018/02/05/xiv-exc ... rcent.html
https://www.cnbc.com/2018/02/05/xiv-exc ... rcent.html
Not Wages. Not Inflation. Volatility..... ETFs.
http://rick.bookstaber.com/2018/02/not- ... -etfs.html
http://rick.bookstaber.com/2018/02/not- ... -etfs.html
- marksmeets302
- Posts: 527
- Joined: Thu Dec 10, 2009 4:37 pm
I must say I despise the recent call for a ban on volatility products. Every time the market drops people start looking for scapegoats. It's buying on margin, It's the bonuses, it's the short selling, it's the volatility products. The people that lost their shirt on Monday didn't protect against tail risks and should have read the prospectus.Euler wrote: ↑Wed Feb 07, 2018 10:54 amNot Wages. Not Inflation. Volatility..... ETFs.
http://rick.bookstaber.com/2018/02/not- ... -etfs.html
Volatility Inc.: Inside Wall Street’s $8 Billion Mess
https://www.bloomberg.com/news/articles ... -time-bomb
https://www.bloomberg.com/news/articles ... -time-bomb
- marksmeets302
- Posts: 527
- Joined: Thu Dec 10, 2009 4:37 pm
Peter, that's exactly the kind of sentiment I was talking about. Sensationalism disguised as analysis. Volatility products are dangerous, but useful too. Yes, they are complex but their working is explained exactly in the prospectus. Anyone who took the time to read them would spot the obvious risks. And then either conclude it's not for them or hedge the tail risks. I did the latter and have been very happy with the performance and would hate to see my favorite vola product the VXX go away. (My strategy was to short VXX and buy one month out, far out of the money calls on the VIX. It's a bit tricky to get the proper amount of calls right so I tried to err on the conservative side. For the last few years, every single month I watched those calls expire worthless. Still, the overall strategy was -very- profitable. This time the calls obviously paid off. In contrast, those without some form of protection will have incurred serious losses)Euler wrote: ↑Fri Feb 09, 2018 2:38 pmVolatility Inc.: Inside Wall Street’s $8 Billion Mess
https://www.bloomberg.com/news/articles ... -time-bomb
Y, I can see that.
I think the modern media no longer produces news, just click and share bait. There is so little real analysis and debate and it's difficult to know what is real any longer.
But in that, I see a lot of opportunities. People seem to be herding more than ever in every market I look it. I sort of thought that was dead and buried but I think in this post-factual world it's on the rise again.
I think the modern media no longer produces news, just click and share bait. There is so little real analysis and debate and it's difficult to know what is real any longer.
But in that, I see a lot of opportunities. People seem to be herding more than ever in every market I look it. I sort of thought that was dead and buried but I think in this post-factual world it's on the rise again.
I think it's interesting that so many have got into trouble by effectively being on the short side of VIX when it's been at historically low levels. Seemed completely mad to me. Crisis appears from nowhere, it doesn't give a warning signal its sudden and swift so I've been happy to have been positioned to benefit from a spike up. Just didn't think it would be so large.
- marksmeets302
- Posts: 527
- Joined: Thu Dec 10, 2009 4:37 pm
I agree, it's like these people never listened to Ed Thorp It's very important to avoid a game over scenario.
The CBOE did calculations on the option pricing on black Monday, 1987. The VIX would then, if calculated in the same way as today, have hit a record of 172! Of course that's a completely insane number. It would mean that the annual implied volatility would be 172%, or a daily volatility of around 10.8%! But just because it's insane and will probably never be realized doesn't mean the number can't get up there.
The CBOE did calculations on the option pricing on black Monday, 1987. The VIX would then, if calculated in the same way as today, have hit a record of 172! Of course that's a completely insane number. It would mean that the annual implied volatility would be 172%, or a daily volatility of around 10.8%! But just because it's insane and will probably never be realized doesn't mean the number can't get up there.