The VIX or the Chicago Board Options Exchange Market Volatility Index (VIX) has become a commonly used market indicator. Most typically it is used as a ‘fear index’ especially in light of the massive volatility seen in the midst of the credit crisis. However the VIX is also just as likely to be misinterpreted than used correctly.
Most observers look for unusual activity in the VIX to identify market turning points. For instance, in what was a pretty dull trading day the VIX plummeted. This along with the structure of the VIX futures curve and its relationship to other indicators of volatility can help provide some clues to the market. In today’s screencast a wrap-up of some recent commentary on the VIX.
Posts mentioned in the above screencast:
An unusual collapse in the VIX. (Don Fishback)
Adam Warner, “The VIX is exhibiting clear signs of complacency.” (InvestorPlace)
Volatility has “joined the QE2 trade.” (Data Diary)
What a low VIX:VXV ratio means for the market. (Quantifiable Edges)