The CBOE VOLATILITY INDEX, or "the VIX" or the "Fear Index" is still well off of its highs from the end of 2008 when it was trading at astronomical levels in the 60’s and the 70’s. But with the slow bleed in the markets, suddenly the VIX is back above the 50 mark.
Traders have historically used the VIX to evaluate oversold conditions,but more importantly it has been a good gauge of the price of options.As the VIX, hence the fear, rises, the cost of buying protectiongenerally is higher.
Whether or not today’s 50 reading holds is still an unknown. But youhave to go back to December 17 to find prints north of 50 on anintra-day basis.
It seems that the market isn’t ready to stop serving the pain dish for dinner.
They have VIX options. So where is that long-promised ETF which tracks the VIX?
Jon C. Ogg
January 14, 2009