4 replies to this topic

[davewooldridge]

The vix went down 6 as the mkts went up huge. I thought it was a measure of volatility no? In fact as the mkt went up 300 vix went down in tandem.

[OEXCHAOS]

The VIX almost always goes down when the market rallies. For some reason, THAT volatility doesn't seem to affect it, Dave. Someone smarter than I has to explain the math, however. Mark

[NAV]

Dave, It's very simple. VIX is not based on actual current volatility, but based on implied volatility or the future volatility perceived by the market. Evidently bull trends are less volatile than the bear trends. The strong retracement rallies of the bear markets are absent in bull markets. Trend are more persistent and as a result there's less volatility risk for those who sell options. Or so is the perception of those who sell the options, which drives down the implied volatility and the VIX. The late stages of bull trend, however, can exhibit huge volatility and during those times, the market can go up and the VIX can also rise at the same time ( ex 1998-2000 ).

Edited by NAV, 19 September 2007 - 07:42 AM.

[eminimee]

I'm not sure of the math either...but vix is based on spx options bought and sold that are in the money and/or one strike above and below (I think)...so the more calls bought ...vix goes down. Or something to that effect...or maybe I'm all wet. lol

[davewooldridge]

I guess a spread would have been the better tactic.