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Did Volatility Traders Overreact Again Last Week?

Volatility expectations took record jumps during Wednesday’s “big” selloff. Last Wednesday saw the stock market break out of its historically tight trading range – and it did so in dramatic fashion. After, for example, trading in a 16-day low-high range of barely 1%, the S&P 500 (INDEXSP:.INX) nearly doubled that…

Ways To Trade And Trade Off Of Market Volatility Indices

The financial press and related blogs are packed with tales of worry about the record low VIX Volatility Index (INDEXCBOE:VIX) levels. With the move below 10 last week, it prompted no less than five full length articles on the Wall Street Journal. Writers worried that we should “Fear the Stock…

Historically Low Volatility Index (VIX) Isn’t Telling Entire Story

This post was written with Craig Basinger of Richardson GMP. Earlier this week the VIX Volatility Index (INDEXCBOE:VIX,), which measures U.S. equity market volatility, moved below 10. Crazy, eh? The VIX measures the implied market volatility being priced into a basket of call and put options on the S&P 500….

VIX Volatility Index Testing 2007 Lows: All Good?

The VIX Volatility Index (INDEXCBOE:VIX) has fallen sharply over the past few weeks.  This has caused some buzz and merits some additional digging. Might be time to let up on the short volatility trade… The chart below looks at the VIX Volatility Index over the past 10 years or so. And as you…

Volatility Traders Betting On Higher VIX Via Call Spreads

Traders are always asking me how to trade volatility. Short volatility has certainly been the way to go this year with VIX Short-Term Futures (NYSEARCA:VXX) down 43%, Ultra VIX Short-Term Futures (NYSEARCA:UVXY) down 70% and Short VIX Volatility (NYSEARCA:SVXY) up 65%.  Truly amazing returns in anyone’s language. Over the weekend…

Is A Bull Market In Volatility (VIX) Nearing?

Over the weekend, I read an article arguing that we are potentially about to enter a bull market in volatility – see VIX Volatility Index chart below for reference (INDEXCBOE:VIX). The writers argument was that we have had an extended period of low volatility since 2012, similar to what we…

Volatility (VIX): A Misleading Measure Of Risk

“History has not dealt kindly with the aftermath of protracted periods of low risk premiums” – Alan Greenspan The ability to see beyond the observable and the probable is the most important and underappreciated characteristic of successful investors. For example, visualize a single domino standing upright. With this limited perspective,…

S&P 500 Index: Weighted Volatility Near Historical Lows

Realized volatility on the S&P 500 Index (INDEXSP:.INX) is approaching historically low levels; similar levels that were achieved in June 1996 and March 2007. Both of these periods saw realized volatility jump roughly 3 times higher in a relatively-short-time-period. So the million dollar question: Is it different this time?  …

S&P 500 Weekly Review & Outlook: The VIX Awakens

In this investing research note, we will analyze key stock market indicators, weigh the health of the S&P 500 Index (INDEXSP:.INX), and discuss old and new themes that we are watching in our investing research. Here are some summary highlights: Upswing in Volatility Could Have Indexes Looking for Support – Volatility…

S&P 500 Bottom Indicator? Watch For A VIX Spike Reversal

Wednesday witnessed several potentially important developments in the markets, but the message is not clear-cut. After straddling the 50-day moving average for nearly three weeks, the S&P 500 large cap index (INDEXSP:.INX) lost it yesterday, albeit not by much.  This was the first time the index closed under that average…