Thursday, July 26, 2007

Some Data on Post-Spike Performance

Back on February 27th, I posted about what typically happens following a 20% and 30% VIX spike. At a high of 23.37, the VIX was recently up 29.1% from the previous day.

You can follow the links below to get some historical context:

For what it's worth, I think today has been way overdone, but that doesn't necessarily mean the worst is over. I suspect it may take several weeks to get this one out of our system.


Robert said...


What is going with the ISEE data? Does it seem reversed to you? I just checked it, it was reading 16. Shouldn't it be somewhere in the 80's to 90's?

Can that possibly be right?

As to your call of this taking a few weeks, I would tend to agree. The CDO issues are not going away over night and margin calls will be issued.

Bill Luby said...


They recently changed their format. The ISEE number that is consistent with their historical data -- and the one that I have been blogging about here -- is the "All Securities" data set in the upper left hand section of their data section.

I show a 100 reading at 15:30, up from 83 at 15:10.



Anonymous said...

bill maybe you can help me is -10vswi bullish for equities and bearish for the vix or bearish for equities bullish for the vix ? Thanx

Dao said...


If I understand correctly, the VIX option can be used only during the expiration day only, therefore, it rarely moved if we still have so many days left! Does it make more sense to use stocks index rather than VIX options? But in the OEX week, it make sense to use VIX?

Bill Luby said...


A -10 VWSI is bearish for the VIX and bullish for equities...over the next 5 trading days (but with additional validity out in the 10-20 trading day range.)


VIX options are European style options and can only be exercised on expiration day. That being said, you can buy and sell them any time you wish, so there are no liquidity restrictions and you need not take a buy and hold until expiration approach.

Regarding your other questions, it can make more sense to use stock index options (SPY, SPX, OEX, etc.) instead of VIX options, but not necessarily for the reasons you raise. VIX options most closely track VIX futures (not the cash/spot VIX you see quoted) up until the expiration, whereas index options track the cash/spot market in real time. Index options generally have lower volatility and are less suceptible to time decay. The case for VIX options lies primarily in the 'bang for the buck' as the VIX is typically 5-10 times as volatile as the SPX, so a large move in the SPX can result a gigantic move (percentage-wise) in the VIX.

I hope this helps. If you want more information, you might want to start with "VIX Futures: The One Picture to Remember."

Cheers and good trading to both of you,


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