why is the VIX dropping?

I looked at the chart and I see what you're saying ammo.

While I glance at what is happening on the longer (daily) timeframe, I only really drill down and pay attention to what is happening on the intra-day level.

Here's a White Paper on the VIX which explains why it was changed from what is now the VXO and why it is still very applicable to trading, regardless of your level of understanding of how it works ... and lets not forget the VXN for our NQ traders, either.

Have a nice weekend.

JJ

 

have a question on vix/iv in general. I know its behavior make sense based on the formula to calculate iv, and vix.

But just in general looking at it logically, if the sp500 were trading at -1% to 1% range, then suddenly gaps up say 10% in 1 day(for argument sake). Why would volatility not go up? Wouldnt this mean the same as if market gaps down 10%? IE: if it moves up 10%, it means it could potentially make more big moves up or falls back down sharply. That's volatility right? why does it make sense for vix/iv not to show this but only shows if the market gaps down.

 

Isn't the vix just another lagging indicator?

Option prices can't predict future volatility they just react to current conditions.. So with that said, why even care about the vix?

Maybe I'm off base here..


Also, with the vix @ 23.44 doesn't that represent an expected move of about 6.5% up or down in the next 30 days?

 

Vix become an absolutely worseless and misleading indicator. Its all based of RV + some weight of OTM strikes (fear factor) volty on the mean .
No fear /lower vols when market goes up ? Just ask short gamma scalper what big move to upside does to his position.

 

Come on A. Just because you don't know how to trade it doesnt mean it's worthless.

 

That’s not what I meant; it has nothing to do with trading ( RM , I said as an indicator and not as trading instrument)

 

OK , vix printed 23…WTF does it mean ( except that average volty of OTM , ATM and ITM of 500 stocks is de facto 23 ) ? What is next? Where market will go based on this # ? Where future vols will go ? Will it reverse to its "mean" ? If yes , when exactly ?
Let’s hear it

 

the fact that it got to 30plus in jan and mar and 23 here means we aren't going any lower ,time for a rally,the panic is a hype on tv,the options don't reflect the panick so it's a divergence indicator

 

It probably would, but not necessarily, because VIX doesn't track the actual volatility of the S&P 500. It tracks the expected volatility, which is based on option premiums. There are other factors that will influence expected volatility--like emotion. That's why big moves higher don't see the same response from VIX as big moves lower, even though statistically the volatility is the same regardless of whether the move is higher or lower.

 

The reason the Vix is not popping is because this selling is from hedge fund redemptions, forced selling, and will be done by month end. Most professionals know this fact, and that the downside is limited. So they are buying into this since you are getting bargain basement prices.

Secondly, expected volatility in the summer is always less, so vix at 23 is comparable to higher levels during high volume seasons.