Q2 STOCKS TO BUY

Where Does VIX Stand After Friday's Spike?

Sure, the CBOE Volatility Index (VIX) is higher after Friday, but what does that really mean?

Apr 20, 2015 at 9:12 AM
facebook X logo linkedin


I'm watching Financial TeeVee on Friday and I hear this: "What should your market strategy be amidst all this volatility?" It was a teaser for whatever guest came up next after the commercial, but, well, let's put that teaser into context.

Yes, the market acted rather poorly on Friday. But "all that volatility" over the past four weeks or so took place in about half a day; otherwise, we're very calm. Ten-day realized volatility in the SPDR S&P 500 ETF Trust (SPY) as of Thursday was 5.7. Of course, it then popped 3 points on Friday, so it's not totally inaccurate to call this a vol pop.

The CBOE Volatility Index (VIX) lifted over 10% on the session. But here's where we start getting a bit misleading: that's a 10% rally off a four-and-a-half month low, and it still has a full in the 13s. And don't even get me started on the iPath S&P 500 VIX Short-Term Futures ETN (VXX) -- it's now on a streak of one straight day without hitting an all-time low. Long story short, don't start reallocating funds and tweaking your strategy based on a half-day vol surge that still leaves us at low-to-mediocre levels, no matter where you look.

I do understand the frustration with the market, though. It's pretty remarkable how poorly we act every time we get at/near the all-time highs in the indices. There's no evidence yet we can break through here. It's just not "volatility" that's an issue. VIX is down big this year, and while that misleads a bit (we closed 2014 with a vol pop), it's still tough to reconcile these levels with anything but "eh." VXX "investors" are pretty much all underwater, as is the norm, so it's tough to find a way that the volatility "asset class" is working for anything but a well-timed, short-term trade. And that's the same as always. I think my favorite part of Friday's dip was that we heard "Greece" again:

"Greece said it won't renege on election pledges to end austerity measures, even as creditors pressed for a compromise to free financing and avert a worsening crisis."

If it seems like this story never ends, well, that's because ... it truly never ends. The good news is we'll stop caring about this soon, like we always do.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

 
 

“Buy This Stock Now!” - Expert Who Called 11x On TSLA

He called a rare 11x on Tesla…

But now, thanks to Elon & Trump’s new alliance…

He says there’s a new opportunity that could be 1,000x BIGGER than Tesla – and it could completely revolutionize a $23 Trillion market.

It’s trading for less than $5 per share right now…

But it won’t be under the radar for long.

Discover The 1,000x Bigger Elon Opportunity Here

GRAND SLAM COUNTDOWN

 
 

Featured Articles from Trusted Partners:

👀Learn How Dividends Create Passive Income for Life
Receive $200 Off Motley Fool Epic. The Motley Fool Epic $299 discounted offer is based on $499/year list price. Introductory promotion for new members only. Take control of your money and your portfolio with Motley Fool Epic.

💵New Income System Could Pay You $4,243 Monthly
You could collect an average of $4,243 per month starting as early as next week with a new payout system for income investors. New registrations are being accepted for investors who want to be in a position to start with their first payout next week.

🚀Easy 92% Crypto Dividends (No Coins Required)
COIN stock doesn't pay a dividend... But there's actually a new way to collect a massive dividend that's indirectly based on the stock and offers a terrific monthly income (currently yielding nearly 92% on a forward basis).

🤝Free Advisor Match with Wiseradvisor.com
Don't leave your retirement to chance! Get matched with a trusted financial expert for FREE and make the most of your tax refund. Get started now.

⚠️Dennis Quaid's #1 Warning for Americans
Here's the thing: life doesn't come with guarantees. The economy shifts, markets stumble, and years of hard work could slip through your fingers like sand. But it doesn't have to be that way for you. So request a free copy of this Gold & Silver Guide that will arrive right to your doorstep when you act now.

 

 
 

Follow us on X, Follow us on Twitter