Silver banana: Why did the VIX go down today?
(Senior Monkey, 84
Points)
on 9/7/12 at 1:12am
Can someone please explain why the VIX went down today even though market volatility went up?
I know that the VIX is based off the implied volatility of S&P 500 index options, so on a big up day shouldn't that send the VIX up too? It seems that latly the VIX only goes up on a bear market day...
Can someone please explain? Silver Banana for the best explanation!
Thanks
"Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid"





Just think of the VIX as a
Just think of the VIX as a fear index. Markets usually move higher when uncertainties are removed. When uncertainties are removed, future volatility should go down, more importantly, that's the perception. When the shit is hitting the fan, nobody knows what is going to happen in the future and people will pay a lot of money to insure their portfolio against losses and implied vol goes up. There is generally an inverse relationship between market direction and VIX levels.
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It went down because of what
It went down because of what the head of the ECB said today. They will buy sovereign debt to reduce the troubled nations cost of borrowing (Italy, Spain, Greece, Portugal to name a few). This reassured (momentarily) the market. Less fear ---> less volatile market ---> lower VIX.
difference between implied
difference between implied vol and realized vol.
I've been asking this forever
I've been asking this forever because I'm a stupid Neanderthal myself, but I think this just about cleared it up for me. It's all based on future vol essentially, so chances are it's wrong, but at the moment it's right? That's my takeaway there... if it's not horribly off? Either way, SBs for everybody, I was curious about this too.
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low job numbers leads to low
low job numbers leads to low potential outlook on the markets..people expecting the markets to react poorly
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Thanks! This was helpful
Thanks! This was helpful