Saturday, October 25, 2008

When will I stop writing a Crisis Watch blog post each morning?

When the VIX drops below 40. Last night the intra-day high was 89 and it closed at 79.

11 comments:

  1. I see it as a wonderful opportunity for swing traders actually.

    And secondly, canny investors should be buying now, because if VIX are to stand for common fear, then hell yeah, I better be greedy at this time.

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  2. and you wanted to short the VIX...

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  3. As Alan Greenspan would say, I am truly shocked at the events! :-)

    I do think that shorting VIX at 58 will make money in the end. But not just yet.

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  4. hehe...

    Of course, yes shorting VIX will actually make sense...

    But its atleast [please God, don't make me commit the mistake of predicting bottoms ;)] one-two months away.

    Soham
    Jumpup

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  5. Ajay,

    Before you can wait for the VIX to retrace to 40 or below (assuming writing naked calls or buying puts and time decay in place), you will have been marginned out.With a professional broker your implied short positions would be automatically liquidated and you will suffer enormous losses.

    Remember the VIX peaked at 150 or so during the 1987 crash. This is bigger than 1987 and 1929 combined.

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  6. Ajay,

    The long-run average for the VIX is 20(data from 1993)and the standard deviation is 7. This year alone the VIX has moved from 23.83 on Jan 2 to 86.15. At these levels the VIX is at 8 standard deviations.

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  7. Folks,

    My data for VIX starts on 2 Jan 1990. Do you have access to the series before this? I had no idea what the values in 1987 were.

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  8. Ajay,

    Here is the link to download the VIX data from 1986.

    http://www.cboe.com/micro/VIX/historical.aspx

    The subtle thing to note is that the VIX prior to 2003 represented implied volatilities of options on the S&P 100 index and since 03 the underlying index is S&P 500

    http://en.wikipedia.org/wiki/VIX

    One of the bloggers is right, the VIX on the black monday on 20th and 21st Oct 1987 was 171 and 138.

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  9. Yogesh,

    Ain't CBOE giving VIX for American Markets?

    I think Ajay is talking about NSE VIX

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  10. Jumpup,

    No, I on the VIX as in the uncertainty about the US S&P 500 index.

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