Thursday, June 7, 2007

How Overextended is the VIX?

In a word: excessively.

With the VIX currently up almost 14% to 16.96 in what is now a four day bounce, today's VWSI threshold numbers, which are good for generating setups for mean reversion plays are:
VWSI -8 at VIX 17.03
VWSI -9 at VIX 17.09
VWSI -10 at VIX 17.76

Keep in mind that most four day VIX moves will reverse dramatically over the course of the next few days. In fact, this may be a good time to review some post-spike VIX tendencies I spelled out following the February 27 VIX spike.


Anonymous said...

Hey Bill,
I too was just taking a very close look at the February hiccup. I would suggest that you take the time to check out the other CBOE indexes after that spike, as it seems there is quite a bit of fascinating implication from combinations of these indicators.

And although the past two or three years seem to indicate a quick return to pre-jump levels, I can't help but consider a nontrivial likelihood of a return to historic volatility levels.

-Michael J Bommarito II

Bill Luby said...

Good point(s), Michael. I was just contemplating what it would make for me to change my opinion about long-term volatility levels vs. the short-term volatility levels that I talk about 99% of the time.

Regarding long-term volatility trends, I'm still in a watch and wait mode, but the monthly VIX chart is starting to get interesting.

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 © 2007-2023 Bill Luby. All rights reserved.
Web Analytics