VIX

Projections for 2010

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As much as I wish there was a system that we could turn the crank and make lots of money on the markets, I think the market is too good for that to work.  We are reduced to educated guesswork.  Some guesses: The S&P 500 will move from its astonishing trendline to a slightly down trending sideways market for 6 months before it starts moving …

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How to go long on the VIX index

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Unlike the S&P 500 or Dow Jones Industrial Index, there’s no way to directly invest in the CBOE’s VIX® index.  Some really smart people have tried to figure out a way, but there’s just no way to do it directly with something like a VIX index fund.  Instead, you have to invest in a security that attempts to track VIX.  None of them do a great …

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Getting the correct greeks for VIX options

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Many software packages that report option Greeks (e.g., delta, gamma, theta, implied volatility) report incorrect values for VIX options (Fidelity, Schwab, Ameritrade , LIVEVOL and Barchart (free subscription) are notable exceptions). Depending on the date and state of the market they can vary from almost correct to widely wrong–giving truly nonsense numbers.  These packages assume that the VIX index is the underlying for the VIX options.  This is wrong.  The best underlying to use is the corresponding VIX future for that month (e.g., January VIX futures for January VIX options).

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Thirteen Things You Should Know About Trading VIX options

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If you want to trade options on fear I’ve listed some things below that you should know.  If you are interested in other volatility investments besides options see “10 Top Questions About Volatility“.  Regarding VIX options: Your brokerage account needs to be a margin account, and you need to sign up for options trading.   There are various levels of option trading available (e.g., the …

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FAQ on VIX, the “Fear Index”

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Why do they call the VIX Index the “Fear Index” or “Fear Gauge” Because the VIX almost always goes up when the market goes down. The scarier the decline the higher the VIX tends to go. In the worst part of the 2008/2009 bear market it went as high as 80. In strong bull markets it historically bounces between 10 and 15. How can I …

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