Volatility Will Make You Rich

Discussion in 'Wall St. News' started by archon, May 12, 2008.

  1. archon



    Volatility Will Make You Rich
    By Dan Caplinger (TMF Galagan)

    May 12, 2008

    Just when you think the worst is over, the market throws you for another loop.

    Consider last Tuesday. Everything seemed great for stock investors. The Dow was above 13,000, and the S&P 500 was at its highest levels since January. Technical analysts were expounding on how significant the breakout was, and some even proclaimed that the downtrend was over.

    But somebody forgot to tell the market. Breaching all of those "important" technical levels and sending investor sentiment back into the cellar, the Dow dropped 200 points the next day and ended down 300 points for the week.

    Bumpy days are here again
    If you're a relatively new investor, the dramatic ups and downs you've been seeing from the markets lately may come as a shock. But what's unusual is how calmly the markets acted in the years before the recent downturn.

    One way to look at historical volatility is through the CBOE Volatility Index, or VIX. Created in 1990 and based on prices of stock index options, the VIX measures the extent to which options traders believe stock prices will move in the near future.

    The VIX has risen sharply over the past year and a half. But that rise came up from extremely low levels -- the lowest since 1993-94. Looking at the readings from 1997 to 2003, we'd have to say that today's VIX looks downright sanguine...

  2. Motley fools are idiots. The dow is only 120 points from 13,000 again. Also, Motley fool recommend some of the worst stocks though their shitty newsletters.
  3. Also, the vix is under 18. Even last week it didn't climb much into the selling.