VIX, the fear index!

On Monday there was a massive one day rise in the Volatility Index (VIX). In particular, the VIX rose more than 43%, the 8th-largest one-day increase in the last 27 years.

For people who don’t know it, the VIX, or more precisely the Chicago Board Options Exchange Market Volatility Index, is a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market’s expectation of stock market volatility over the next 30 day period.

The following table gives you some interesting information about what happens historically to the stock market when this events occur.

vix_01

Historically a rise of VIX of more than 33%  has led to a very short-term rebound (like yesterday) and more selling pressure after that.

In particular, when the S&P had dropped less than -4% on a day the VIX rose more than 33%, the S&P declined over the next two weeks 5 out of 7 times, and one of the positive instances fell apart right after that.

vix_02

It seems a good moment to short the stock market, isn’t it?

 
 
DISCLAIMER: This overview is for informational  purpose only and do not represent a solicitation to actually buy, sell or hold shares of a particular stock. All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is no guarantee of future price appreciation.