how does vix futures buying cause real market volatility?

Discussion in 'Trading' started by cole_, Feb 8, 2018.

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  1. cole_


    Last edited: Feb 8, 2018
  2. JackRab


    It's a chicken egg thing. Both buying vol and selling equities are risk-off trades.

    First VIX was very low and equities at all time high, so people start buying some vol... I think it started by buying OTM calls in SPX, pushing up VIX.

    Then some started selling equities, because we're at all time highs and 10 yr yield creeping up.

    Then vols rise a bit further and together with the selling pressure possibly some short vols get squeezed... snowballing into more vol buying and equity selling since vol is getting expensive and equities still at relatively high levels... heavy selling turns into heavy vol buying... vol derivatives are being squeezed... VIX spikes and all kinds of algo's run for the door... crash...
    cdcaveman and jys78 like this.
  3. cole_


    do institutional traders consider out of line vix moves to be the mark of smart money or something?
  4. JackRab


    Where was it out of line?
  5. cole_


    if you had bought the s&p in mid 2014 you would've gotten your profits wiped out by the 2015 crash. the move this month was nothing like that but the vix still went to 2015 levels
  6. JackRab


    Wasn't 2015 similar? Also about 10%?

    I don't think a VIX at current levels of 30-35 while the markets move up and down 2-4% is out of line. That initial spike up was about the market suddenly waking up to reality. VIX and implied vols in general aren't about where the market is compared to half a year or one year ago. It's about the daily/weekly forecasted volatility.

    It's all about perception... and the general perception is that for the coming days the market will stay volatile so options premiums will not drop massively. So VIX will stay up.
  7. prc117f


    The good times are back. :)
  8. Overnight


    I just reported you for that. That is so tactless and BS. You post a thread with a title, and because in order for the thread to work you just type gibberish? hgjghjghjg?

    The hell is wrong with you? Why not explain in more detail what you wish to convey in your thread, rather than toss out miniscule distortions of your own mind in a thread title and then brush off everyone else? So now folks are responding to you with your little ?kajghdaksj" thing. That is so rude of you to do.

    Just MHO.
    srinir likes this.
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