Thursday, December 31, 2009

VIX and More 2009 Year in Review

While I thought the Top Posts of 2009 captured many of the high points on the blog during the past year, I also believe it might be interesting for readers to hear about which posts were some of my favorites.

Looking back at everything I wrote in 2009, I suspect that my most important work was probably with VXX, the iPath S&P 500 VIX Short-Term Futures ETN. I believe I was the first to analyze VXX in any detail, discuss some of the shortcomings and ultimately tie it all together in Why the VXX Is Not a Good Short-Term or Long-Term Play. Along the way, I think VXX Calculations, VIX Futures and Time Decay was the piece that shaped the thinking of many investors. In terms of timeliness, VXX Juice Factor and Portfolio Insurance Implications was a warning shot I fired in the first month after VXX was launched.

While volatility declined almost in a straight line for the entire year, stocks did not. In retrospect, The Possibility of a ‘Stealth Bottom’ was one of my best predictions and my March 5th SPX at 687; Intermediate Bottom Potential Is High was only one day early.

Some of my favorite posts of the year were related to how to think about trading. The Trader Development Stage Model – Version 2.0 was a way for me to articulate some of my thinking on the subject of how traders evolve. In The Trader Development Stage Model and the Jump from Stocks to Options I liked how the model explained how and why new options traders get into trouble. A precursor to the model was a pair of posts Kafka, Surrealism and Trading and Comfort Zones, Focus and Thinking Like a Biotech Firm which address trading strategy development. Earlier in the year, Can Options Selling Make You a Better Trader? probably got the wheels turning about some of the elements of superior trading performance.

In another impromptu series of posts, I dipped my toe into behavioral finance in Availability Bias and Disaster Imprinting. The ideas from that post became much more compelling when I tied them back to the VIX in The VIX:VXV Ratio, Availability Bias and Disaster Imprinting and later in VIX Data to Support Availability Bias and Disaster Imprinting Hypothesis.

It turns out that the behavioral finance posts and several posts on realized volatility shared some analytical ideas. In The Gap Between the VIX and Realized Volatility I posted my what I believe is my first graphical representation of the difference between the VIX and realized volatility. When that extended gap finally came to an end, I posted about it in Chart of the Week: No More Free Lunch for Volatility Sellers?

With other voices now regularly discussing the VIX, I don’t feel the need to post on that subject as much as I once did, but my incredulity recently boiled over in The VIX Spike Conundrum after I saw many pundits essentially suggesting that investors panic along with the crowd.

Last but not least, two of my favorite humorous interludes were Roubini and the VIX and Blogging Network a Better Buy than Business Week?

On a personal note, I am delighted to say than in many instances it was reader comments and private emails which provided the inspiration and kicked started a dialogue of ideas that eventually resulted in some of these posts. I continue to be surprised by the extent to which blogging is a collaborative process and am thankful to all who have made my life richer in 2009 by sharing their questions and insights.

Disclosure: none

blog comments powered by Disqus
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