Courtesy of John Nyaradi.
VIX, the CBOE Volatility Index, also known as the “fear index,” jumped today on worries over Europe and earnings.
VIX jumped 5.15% today to close at 17.98, below its long term average and 50 day moving average as it bounces off near term lows set last week.
At current levels, VIX is at extreme lows entering earning seasons compared to prior recent years.
As the old saying goes, “when VIX is low, look out below,” meaning that if VIX is low it could make a sharp reversal upwards which would point to lower stock prices ahead since VIX moves usually moves inversely to major stock indexes.
Volatility Index – New Methodology (VIX): Index: 17.98, +5.15%
iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX): -0.83%, This ETN is designed to track volatility in the markets as measured by the Chicago Board Options Exchange Market Volatility Index (CBOE Index), a popular measure of the implied volatility of S&P 500 index options. The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets. The iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX) prices itself off of the average and implied volatility of the first two months of futures contracts of the S&P 500 Index.
VelocityShares Daily 2X VIX Short-Term ETN (NYSEARCA:TVIX): -2.6%, This ETN is designed to track 2X return on volatility in the markets as measured by the S&P 500 VIX Short-Term Futures Index. The S&P 500 VIX Short-Term Futures Index measures the volatility of the S&P 500 Index via futures contracts as traded on the CBOE. The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets.
iPath S&P 500 VIX Mid-Term Futures ETN (NYSEARCA:VXZ): -1.3%, This ETN is designed to track volatility in the markets as measured by the CBOE Volatility Index futures contracts. The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets. The iPath S&P 500 VIX Mid-Term Futures ETN (NYSEARCA:VXZ) is priced from the average volatility of the 4th through 7th month futures contracts of the S&P 500 Index as traded on the CBOE.
S&P 500 Dynamic VIX ETF (NYSEARCA:XVZ): -0.65%, This ETN is designed to track volatility in the markets as measured by the S&P 500 Dynamic VIX Futures Total Return Index. The S&P 500 Dynamic VIX Futures Total Return Index seeks to combine results of volatility of the S&P 500VIX Short-Term Futures Index Excess Return and the S&P 500 VIX Mid-Term Futures Index Excess Return to create an accurate market volatility reading, as measured by the CBOE. The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets.
Velocity Shares Daily Inverse VIX Short-Term ETN (NYSEARCA:XIV): +0.67%, This ETN is designed to inversely track the volatility in the markets as measured by the S&P 500 VIX Short-Term Futures Index. The S&P 500 VIX Short-Term Futures Index measures the volatility of the S&P 500 Index via futures contracts traded on the CBOE. The CBOE Volatility Index is also known as the “fear” index or “fear” indicator in markets.
Bottom Line: VIX is relatively cheap by historical standards and as earnings season progresses and Europe bubbles, many market participants expect VIX to rise as investors hedge bets or take outright directional trades on the future pricing of VIX. Negative momentum is slowly turning positive and so the probability of a rising VIX, falling stock environment grows.
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