I was very surprised Monday morning when sentiment turned around and the market went into decline. Perhaps people were nervous that the House wouldn’t approve the budget proposal, but it seems more likely mixed economic news prevented any sort of euphoric reaction, or people realized that an agreement to add another trillion or two of debt really isn’t cause for celebration. I held onto my …
With Greece’s Euro problems successfully extended out a few more months, and the economy continuing to consistently send mixed messages, the focus of fear is the budget cap. I’m thinking neither party has the stomach for the wholesale disruption of the Treasury’s affairs. I wouldn’t be surprised to see one more major upswing in the VIX, but right now the prospect of a happy ending …
One of the scariest things about market panics is their unpredictability. All of us remember the dark days of 2008 and 2009, not so many the October 1987 crash. For me, both of those crashes carried the same sense of disruption—the feeling that things would never be quite the same again. I’ve been looking at the history of volatility because it’s clear to me …
I keep an eye on the 6 month chart of VIX index’s relation to its Bollinger bands when I’m thinking of making a volatility trade—even when the trade I’m contemplating is a non-VIX related security (e.g., VXX, or XIV). Of course there is nothing iron-clad about it, but as an objective measure I consider VIX touching/near touching its 2 sigma lines to be an …
Originally posted July 18, 2011 Update: VZZB terminated in October 2012, consistent with the 1.5 years or less of life that I predicted below. Barclays didn’t waste any time replacing its recently terminated VZZ ETN. The new fund, targeted at leveraged long performance relative to medium term volatility appears essentially identical to VZZ except for its new inception point (8-Jul-2011). Rather than follow daily percentage moves, Barclay’s …
