Wednesday, October 8, 2008

VIX Sets Third Consecutive End of Day High

The new end of day mark is 57.53...and the official new intra-day VIX high is 59.06

For reference, the all-time high close as of two weeks ago was 45.74, making today's record a 26% increase.

9 comments:

Dag said...

The VIX is going bananas! It's crazy. My somewhat limited studies of difference between HV and IV and HV in late 20's early 30's didn't prepare me for this. I would think the Oct08 50 VIX calls was a safe bet (safe as the bank - phun intended), but now it's totally creating havoc with margins calls etc.. Personally I'm just praying for a rally to allow me to unload..

John said...

Wait until tomorrow... Many derivatives desks have been wondering what the short sale ban ending will do to the VIX

Anonymous said...

I agree that the short sale ban has brought about more put buying (in order to short) which in turn artificially pumped up the VIX. A "real" VIX is perhaps at least 10 pts lower.

Dag said...

Thanks John! Will do. Have been suspecting the short sale ban was a reason, guess tomorrow will tell.

Anonymous said...

The sp500 is going to 650 in the next 8 months. Easy to see. Don't be fooled. Don't get fooled by daily, weekly charts. Look at monthly and quarterly charts. Also notice the first companies to break down in the long term charts were the ones that had debt financing.

Remember to survive you need retained earnings, not debt financing.

The Vix measures heart beat. When the patient dies. There is not much to measure, except 6 feet.

Captain H said...

If and when the VIX falls what kind of movement will we see on the VIX puts? I hear that when the VIX moves up there is very little action for the VIX calls, is that the same for the VIX puts?

Thanks in advance.
Captian H

Anonymous said...

"I agree that the short sale ban has brought about more put buying (in order to short) which in turn artificially pumped up the VIX. A "real" VIX is perhaps at least 10 pts lower."

why then we have such a low put/call ratio, also ISEE call/put for the market such as this? We would expect reaching the extremes also in these two numbers.....

Anonymous said...

"why then we have such a low put/call ratio, also ISEE call/put for the market such as this?"

Anon,

The VIX is a measure of implied volatility, based on the bid/ask of the option prices. The ratios you mention above are based on contracts that are actually traded. They are two very different measures.

Overall option trading has actually decreased since the ban probably because the bid/ask spreads are much wider than normal.

Bill Luby said...

Captain H,

The key to understanding the movement of VIX options is to focus on the underlying, which is VIX futures, not the cash/spot VIX you see quoted. Focus on the futures and you will see that a lot of mean reversion is typically priced in to any strong VIX move, so the futures and options move much more sluggishly than the VIX on the way up -- and on the way back down.

Cheers,

-Bill

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