Monday, January 29, 2007

More on the VIX Fizz on Fed Days

We have already established that the VIX tends to fizzle on Fed Days, but how often does it pop 10% following an announcement?

Not very often, it turns out. In fact, you have to go back 104 Fed meetings ago to February 4, 1994 (the same 1994 that Doug Kass was talking about as a 'bear template') to find the most recent 10% Fed Day VIX spike upward -- and that is the only 10% Fed Day jump since the VIX was officially rolled out in 1993.

It should come as no surprise that 1 in 104 is almost in the black swan category in terms of the VIX. I noted previously that almost 1 in 3 weeks sees a VIX move of 10% in one direction or the other, so don't expect to be surprised on Wednesday and think long and hard about paying a premium to get a front row seat to see the next black swan.

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