Friday, October 18, 2013

How's this for a VIX?

Check out this chart:

The $VIX index has utterly collapsed since the US government decided to stop being morons for a couple months.

You'd have to wonder if maybe this excitement goes on for just another day, and then the US markets dive or at least hold steady for a while. Cos this is just way too much of a short-term thrust.

Of course, what is the $VIX?

It's an index of the premium on options. So I guess all this is really saying is that short-term puts are no longer in the demand that they were a week ago. Which is obvious.

The market advancing would eventually, I guess, make more people buy downside puts after a few more days of advances. So in the next few days we might instead see $VIX advance back up with the market advancing as well.

Then again, an advancing $VIX might be a signal to the algos to sell the S&P. A self-fulfilling incorrect prophecy.

Then again then again, that would just drive dumb money (i.e. the algos) out, which would be a good situation for an advancing S&P.

So the $VIX means nothing and you should ignore anyone who talks about it.

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