VIX misconception?? -- Must read

Very interesting from Forbes Magazine:

http://www.forbes.com/2003/06/18/cz_lm_0618soapbox.html

Comments?

 

if you want to lose your house and more, trade options esp oex.

 

Smart of you to at least not to trade things you don't understand.

Nice article.

 

Trading anything with leverage is almost certain to lead to a blowout.

If the VIX is low, then the Bollinger Band would be narrow I guess. Narrow bands are possibly more definitive because you can use the length of the channel in your decision making, and the width of the bands' channel.

Max

 

IVs sometimes do explode when the market goes higher. It is a sign that the rally is topping out.

 

Anyone have charts of VIX before the 90's? I thought I remembered seeing one a few years back.

 

Theoretically, it seems that McMillan is right. One thing that is definitely true: the last time that I can remember the VIX rising along with rising prices was in March, 2000. Particularly during options expiration week and the week following when the FOMC committee met. VIX hasn't been rising though in quite awhile, so I don't really see the parallels there, in fact its been locked in a small range since early May...

 

I tried to post a chart showing VIX and the S&P500. Going back to 1987, the VIX peaked at 152 on 10/19/1997, it then trended steadily downwards to the low of 9.50 on 01/28/1994. This while the market was rising. From the 9.50 low, VIX moved higher along with market. If someone can tell me how, I will post the chart. It's from TC2000. At current levels, VIX is still pretty high on a historical basis.

 

I think you mean 10/19/87.

 

The max of VIX was like 173 in Black Monday. I try to attach a chart.