VIX = 14.30

There’s been a lot of talk about the $VIX today which is an index of implied volatility. (Quick definition: Options prices require an input for volatility. Therefore you can take the current options prices and work backwards to see what the market is pricing for volatility). The $VIX just hit a three-and-a-half year low of 14.30.

The problem is that a lot of talking heads assume that a lower $VIX is good for stocks. It’s neither good nor bad. Volatility just is. I’ve found some evidence that the stock market does a little better than usual when the $VIX is very low, as in under 13.

Let’s remember that one of the best buying opportunities in the last 200 years came in March 2009 when the $VIX was at 50.

Posted by on April 20th, 2011 at 12:53 pm


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