Tuesday, February 27, 2007

One Day 20% Spikes in the VIX

There have been 20 VIX spikes of 20% or more in one day since 1990. Today makes 21, with the VIX currently up 21% on the day at 13.52.

Looking at that group of 20 VIX spikes, you can see the footprint of 9/11, the dot com bubble bursting, the Asian financial crisis and similar difficult periods. It is worth pointing out that in 17 of those 20 instances, the VIX was lower 3 days later, 5 days later and 10 days later (interestingly enough, it was a different grouping of VIX spikes that defied the trend in each time period.)

If history is any guide, the VIX should subside about 10% over the course of the next three days and another 2% or so by a week from now. This is the mean reversion tendency of the VIX at work.

While the SPX is ‘only’ down 1.5% at the moment, it is also worth recalling previous research posted here that when the SPX drops 3%, the VIX’s mean reversion tendency over the next five trading days paints a telling picture.

0 comments:

DISCLAIMER: "VIX®" is a trademark of Chicago Board Options Exchange, Incorporated. Chicago Board Options Exchange, Incorporated is not affiliated with this website or this website's owner's or operators. CBOE assumes no responsibility for the accuracy or completeness or any other aspect of any content posted on this website by its operator or any third party. All content on this site is provided for informational and entertainment purposes only and is not intended as advice to buy or sell any securities. Stocks are difficult to trade; options are even harder. When it comes to VIX derivatives, don't fall into the trap of thinking that just because you can ride a horse, you can ride an alligator. Please do your own homework and accept full responsibility for any investment decisions you make. No content on this site can be used for commercial purposes without the prior written permission of the author. Copyright © 2007-2013 Bill Luby. All rights reserved.
 
Web Analytics