Opinions
William Chin
CBOE Volatility Index
VIX-I
DON'T BUY
Sep 16, 2016
$15.370
Stock price when the opinion was issued
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COMMENT
From day to day, it will be very choppy. Volatility is telling him we are in a bear market. Not down 20% yet, but over the next 6 months, we will see the US stock market below 20% its peak. Canadian market is a different situation with exposure to energy and commodities. Won't see such a large correction. However, TSX didn't get as much of the upside.
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SELL
It's another indicator that tells us about nervousness by sensing volatility. If you own the VIX, this is probably a really good time to sell. It's right at the peak that we saw last August.
It's a background thing, not a way to perfect timing. Tells you the neighbourhood you're in, but doesn't tell you what to do. You can look at these moves in terms of standard deviations, and how far away from the average we are. Moves of 2 or 3 don't sound big, but they're actually quite big in terms of deviation from the average.
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A compilation of the S&P 100 on the prices of front contract Calls and Puts. When market participants expect higher volatility, they are willing to pay more for the Puts. The stock market is majority natural Long, so when market participants are bullish, they are unlikely to be more for the Call. The index usually goes up when the price of Puts goes up, i.e. when people are getting nervous. It is only “implied” volatility. He wouldn’t hold this for longer than a few months, because you get eroded by the transaction costs and the rebalancing.