Tag Archives: CBOE Volatility Index

Trading Strategy – CBOE Volatility Index

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, spiked more than 45 percent on Friday to trade above 28, for its greatest weekly gain on record (going back to 1990) and up more than 100 percent month-to-date for August, on track for its largest monthly rise since 1990.

Often refers as investors fear gauge, VIX tends to move inverse to stocks and is used to determine the severity of futures moves in stocks.  General speaking, a reading above over 30 often associates with some sorts of selling panic while a move below 20 indicates complacency.  Below is an update look at a trade in VIX.

Chart 1.1 – CBOE Volatility Index. (daily)

Looking at the 4-year daily chart of VIX, we can see that last week’s massive selloff had caused volatility to spike above the summer 2012 high.  With Friday’s gain, VIX is now traded above the complacency threshold and into the panic threshold.  This is negative from a technical standpoint because it signals a start of a new down wave…Click here to read more.

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