Thursday, October 16, 2008

Welcome to the 80s: VIX at 81.17

...and the Oct 100 calls now at 1.40 - 1.60

6 comments:

diegoengel said...

Bill, we were just sitting around and watching VIX bounce around. Seeing that you follow this reading pretty closely, could you tell us what the theoretical highest number VIX could hit?

Bill Luby said...

Hi Diego,

The VIX is theoretically unbounded to the upside. In 1987 its predecessor (VXO) hit 172. I haven't tried to apply a synthetic VIX to the Great Depression, but I can imagine a reading of 200+ without too much difficulty.

Cheers,

-Bill

Jughead said...

I'm starting to believe we will need to see a 1987 style spike in the 150-200 range before we will see true capitulation/market bottom.

Jeff said...

Bill, I remember a good past piece you did on defining VIX with a good comment from someone. The comment gave some illustrations of what actual market moves were consistent with that level of VIX over a given time frame.

That would be a useful example right now for the 70 - 80 level. If you have something like this already and I missed it, maybe you can provide a new pointer.

Thanks,

Jeff

Bill Luby said...

Hi Jeff,

I'm drawing a blank on your reference right now, but if I can some up with something that fits the bill, I will post it.

Are you thinking about something like a Beaufort Scale for market volatility? That could be fun...

Cheers,

-Bill

P.S. Thanks for giving me a nudge in your post earlier

Jeff said...

Bill, I found the item I remembered from your site. It was from March 17, 2008. A comment from "Frank" showed some good examples of what trading is required to reach certain volatility levels.

We do volatility forecasts, so I could do some simulations, but you are in the spotlight right now :)

I want to write something that provides more analysis, so I am looking for some of your best explanations, etc.

Thanks,
Jeff

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