Friday, October 24, 2008

Two New VIX Records

The VIX established a new intra-day record of 89.53 and end of day record of 79.13, obliterating the previous records from last week by more than 8 points each.

Today's action marked the third Friday in a row that the VIX established a new record close. The VIX has now closed over 50 for 15 consecutive sessions, with the 10 day moving average now up to an even 64.00.

6 comments:

Anonymous said...

As far as I can tell, the highest 10 day ma before this was in 1998 during the Asian currency panic.

It reached a high of 42.

Now we're at 64.

Either this panic is gonna end real soon or we're in some deep trouble.

stretcho44 said...

On October 17th, the options market makers exemption to the naked shorting ban was canceled. They now have to borrow shares if they need to short for a hedge. The additional share borrowing costs have to be reflected into the option prices. Borrow fees on hard to locate shares can be very high leading to abnormally high option pricing. They cannot generate free shares to short anymore.

The generally higher option prices will naturally compute a higher VIX. I have not seen anyone discuss this or try to quantify the impact of the naked shorting ban on VIX.

Doesn't this option premium increase cause "fear" to turn to "panic" with a higher VIX?

Bill Luby said...

Hi stretcho,

I'm not sure about the market maker economics here and how much they impact options prices.

I frankly didn't see anything that happened with the VIX from 10/17 on that was inconsistent with what was going on with the SPX.

Readers, any thoughts here?

Anonymous said...

The S&P 500 futures are down 31 points this morning. It should be interesting to see if the cash VIX index spikes to another intra-day and/or closing high today. The current intra-day and closing highs are 89.53 and 79.13.

Anonymous said...

I think we are set for a huge rally sooner than anyone belives. People are getting used to VIX this high, even bored, expectations almost converged to maximum bearishness. A relief rally or the beginning of the next bull ? Who knows.
Things change much faster theses days with widespread global hedge-fund competition than in previous bear markets.

Anonymous said...

The VIX cash index closed at a level of over 80 for the first time since the crash of October 1987 today. October 2008 continues to be a record-breaking month for the VIX cash index.

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