CBOE Volatility Index (VIX) Archives - Page 2 of 4

VIX Warns Of Imminent Market Correction

Posted on November 18, 2019November 17, 2019 by Chris Vermeulen

The VIX is warning that a market peak may be setting up in the global markets and that investors should be cautious of the extremely low price in the VIX. These extremely low prices in the VIX are typically followed by some type of increased volatility in the markets.

The US Federal Reserve continues to push an easy money policy and has recently begun acquiring more dept allowing a deeper move towards a Quantitative Easing stance. This move, along with investor confidence in the US markets, has prompted early warning signs that the market has reached near extreme levels/peaks.

VIX Value Drops Before Monthly Experation

When the VIX falls to levels below 12~13, this typically very low level is usually associated with an extreme peak in price. Throughout history, after the VIX has collapsed to these types of low price levels, the markets have a tendency to revert/correct in ranges that are typically in excess of 3.5% to 5.5%. In some cases, these corrections have been as large as 11% to 18% or more.

Continue reading "VIX Warns Of Imminent Market Correction" →

Pendulum Swing No.5: Back To Success!

Posted on July 3, 2018July 2, 2018 by Aibek Burabayev

It’s time to announce the result of the 5th Pendulum swing pushed this January. In that race, I put heating oil (ultimate futures winner in the second half of 2017) vs. wheat futures (the top loser). The Pendulum effect favored the top loser, i.e., wheat to beat heating oil in the six month period. The image below contains the poll results of your voting for that experiment.

Image 1. Poll results

Chart courtesy of INO.com

Bingo! The majority of you guessed right choosing wheat as a winner and as you can see in the next chart that wheat has gained +17.56% as heating oil gained only +6.76. I would like to express my gratitude to those who chose the experiment success option for your trust! So after the first failure in the second half of 2017 (4th swing), the Pendulum experiment is back on a winning track! Let’s try it again and see what happens.

Chart 1. Half Year Futures Performance (First Half of 2018)

Chart courtesy of finviz.com

This time we will have an interesting race as the winner in the first half of 2018 is not a commodity, but the CBOE Volatility Index (VIX) also known as the stock market fear gauge. It gained more than 40%, leaving its rivals far behind amid the roller-coaster ride in the S&P 500.

On the other side, which is red, there is the biggest loser, sugar with an almost 20% loss in the first half of 2018. The supply glut in the sugar market undermined the price for this commodity significantly. Continue reading "Pendulum Swing No.5: Back To Success!" →

Did You Own Any Of The Worst ETFs of 2017

Posted on January 23, 2018March 24, 2021 by Matt Thalman

2017 was a good year for investors as the S&P 500 increased 19.42%, but unfortunately, not all investors saw their investments grow in value during the year. Investors who had purchased some different Exchange Traded Funds saw their investments nearly disappear during what will be referred to as an “up” year for investors and the stock market.

What is not surprising though is that seven of the nine most prominent ETF losers of 2017 had something to do with investing in the Volatility Index. The worst performer was the ProShares Ultra VIX Short-Term Futures ETF (UVXY), falling 93.96%. This fund provides 2X exposure to short-term, first and second month, VIX futures. The UVXY is a fund essentially will offer investors a way to make money if the VIX itself increases. Furthermore, because this fund is leveraged 2X, if the VIX increases by 10%, UVXY investors will make 20%. But, due to the fund's exposure, it has high carrying costs, meaning investors who hold the fund for more than one day will lose money due to those roll costs.

Therefore, the UVXY needs both the market to be volatile regularly for investors to make any money, even over a small period of time. In 2018 its unlikely UVXY will lose as much as it did in 2017 because the end of 2016 was highly volatile following the election of President Trump. Continue reading "Did You Own Any Of The Worst ETFs of 2017" →

How You Can Make Money From Market Volatility

Posted on August 22, 2017August 22, 2017 by Matt Thalman

Based on a number of recent reports indicating the major indexes could end the year flat from where they sit today, I offered a few ideas on how investors could still profit during the last four months of 2017.

One of those ways was using Exchange Traded Funds that invest in the futures of the Volatility Index. For most investors, the CBOE Volatility Index or VIX or even the 'fear gauge,' is a rather complicated and confusing market measuring stick. So, today we are going to go through the 'ins' and 'outs' of the VIX and go into a little more detail on how the average investor can use the VIX ETF's to turn a little profit from time to time.

The CBOE Volatility Index (VIX) was designed to put a number on market volatility so investors could trade and make money based on the volatility of the stock market. This is achieved through the use of the futures market and options prices. The VIX tells investors the square root of the risk-neutral expectation of the S&P 500 variance during the following 30 calendar days.

The VIX is often quoted as a number, say 10, 20, 25. That number represents the expected annualized change, with a 68% probability of being true, of the S&P 500. So for example if the VIX is at 20, it would be predicting the S&P 500 will change up or down by 20% over the next 12 months. Continue reading "How You Can Make Money From Market Volatility" →

Market May End The Year Where It Is Today, But You Can Still Make Money

Posted on August 16, 2017August 16, 2017 by Matt Thalman

A number of market participants have begun making year end predictions about where they believe stocks will finish. The predictions have the market finishing higher, lower, a lot higher, a lot lower, and right where it is today. Basically, no one really knows how the stock market will finish 2017 because no one can accurately predict the future.

But, when we look at the past, predictions have been made which aren’t as optimistic. Based on historical data a Goldman Sachs analyst has noted that when stock valuations have been where they are today, the market returns have been in single digits or negative.

Year-to-date the S&P 500 is already up 10.5%, which again compared to historical averages is an above average return. Furthermore, history tells us that we have market pull backs of 5%, 10%, and 15% rather often; about every 3 months, 8 months, and 14 months. We have not seen a 10% or 15% pullback in 2017. Continue reading "Market May End The Year Where It Is Today, But You Can Still Make Money" →

Tag: CBOE Volatility Index (VIX)