{"id":108830,"date":"2017-07-11T10:33:43","date_gmt":"2017-07-11T14:33:43","guid":{"rendered":"http:\/\/countingpips.com\/?p=108830"},"modified":"2017-07-11T07:34:32","modified_gmt":"2017-07-11T11:34:32","slug":"will-volatility-continue-to-flatline","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/07\/will-volatility-continue-to-flatline\/","title":{"rendered":"Will Volatility Continue to Flatline?"},"content":{"rendered":"<div id=\"inves-3619970714\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">July 11, 2017<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><p>By <a href=\"http:\/\/WallStreetDaily.com\/\"><u>WallStreetDaily.com<\/u><\/a> <img loading=\"lazy\" decoding=\"async\" class=\"attachment-home-th size-home-th wp-post-image\" style=\"display: block; margin-bottom: 5px; clear: both;\" src=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/07\/0717_volatility_feature.jpg\" sizes=\"auto, (max-width: 580px) 100vw, 580px\" srcset=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/07\/0717_volatility_feature.jpg 580w, https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/07\/0717_volatility_feature-300x155.jpg 300w\" alt=\"Will Volatility Continue to Flatline?\" width=\"580\" height=\"300\" \/><\/p>\n<ul>\n<li>The VIX Index has no pulse.<\/li>\n<li>Is this celebrated indicator DOA?<\/li>\n<li>Or is it about to awake from its slumber?<\/li>\n<li><strong><a href=\"https:\/\/pro.agorafinancial.com\/m\/709709\" target=\"_blank\" rel=\"noopener\">Also recommended: Nothing drives a stock higher or faster than this\u2026<\/a><\/strong><\/li>\n<\/ul>\n<hr \/>\n<p><img decoding=\"async\" style=\"float: left; max-width: 85px;\" src=\"https:\/\/duip7hn7nchpo.cloudfront.net\/editor-circle-louis-basenese.jpg\" alt=\"Louis Basenese\" \/>So the VIX has flatlined.<\/p>\n<p>It\u2019s been meandering along in a sideways direction for nearly four years.<\/p>\n<p>In fact, the four-year chart of the VIX looks like an electrocardiograph (EKG) of a recently diseased person.<\/p>\n<p>Sure, you\u2019ll see an occasional blip.<\/p>\n<p>But not even a dead person has a ruler-straight EKG line.<\/p><div id=\"inves-1398037151\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>Sorry, folks \u2014 that long, continuous \u201cflatline tone\u201d when you die is mostly a Hollywood fabrication.<\/p>\n<p>I\u2019m covering the VIX today because it was once a key contrarian indicator.<\/p>\n<p>Perhaps it\u2019s time to announce this patient as dead, though.<\/p>\n<p>Let\u2019s check the vitals\u2026<\/p>\n<p>Also known as the \u201cfear index,\u201d the VIX measures the volatility of the S&amp;P 500.<\/p>\n<p>High VIX levels (above 20) suggest a fearful market.<\/p>\n<p>Fearful markets represent great times to buy.<\/p>\n<p>Low VIX levels (below 20) speak to a complacent market.<\/p>\n<p>Complacent markets represent great times to take some profits.<\/p>\n<p>Generally speaking, the VIX climbs about 4% for every 1% fall in the S&amp;P.<\/p>\n<p>The last notable upward blip on the VIX came in September 2015 as the result of a dovish Fed announcement. And it barely moved the S&amp;P\u2019s needle.<\/p>\n<p>I asked my senior analyst, Martin Hutchinson, a simple question\u2026<\/p>\n<p>Is the VIX is dead\u2026 or can it be shocked backed to life with paddles?<a name=\"video\"><\/a><\/p>\n<p>Hutch\u2019s full report is below.<\/p>\n<p>Ahead of the tape,<\/p>\n<p>Louis Basenese<br \/>\nChief Investment Strategist, <em>Wall Street Daily<\/em><\/p>\n<hr \/>\n<p><script src=\"https:\/\/fast.wistia.com\/assets\/external\/E-v1.js\" async><\/script><\/p>\n<div class=\"wistia_responsive_padding\" style=\"padding: 57.0% 0 0 0; position: relative;\">\n<div class=\"wistia_responsive_wrapper\" style=\"height: 100%; left: 0; position: absolute; top: 0; width: 100%;\">\n<div class=\"wistia_embed wistia_async_iv024bocdz videoFoam=true\" style=\"height: 100%; width: 100%;\"><\/div>\n<\/div>\n<\/div>\n<hr \/>\n<p><strong>Martin Hutchinson:<\/strong> Today I\u2019d like to talk about the VIX \u2014 the Chicago Board Options Exchange Volatility Index \u2014 and how it\u2019s useful to investors.<\/p>\n<p>VIX shows the market\u2019s expectations of 30-day volatility. It\u2019s a measure of how much the markets are expected to bounce around in the next 30 days.<\/p>\n<p>It calculates the weighted average of implied volatility of eight Standard &amp; Poor\u2019s 500 index options.<\/p>\n<p>What\u2019s implied volatility?<\/p>\n<p>You take the price of the options and shove it backward through the Black-Scholes options valuation model and out spits the implied volatility.<\/p>\n<p>Usually you use the Black-Scholes model to start with volatility and end up with a price. Here, you\u2019ve got the price and you want the volatility, so you feed it through backward.<\/p>\n<p>Note that the implied volatility is the market\u2019s forecast of volatility. It doesn\u2019t actually represent real volatility or what the volatility\u2019s going to do. It\u2019s merely what options prices think volatility will be.<\/p>\n<p>The VIX is around 10\u201315 in calm times. It\u2019s about 10 at the moment. It goes above 30 as markets get choppy. Today, at around 10, the market\u2019s very flat and complacent.<\/p>\n<p>VIX acts as a fear index even if the market isn\u2019t more volatile in a bear market. In other words, even if the market doesn\u2019t move much, VIX goes up anyway.<\/p>\n<p>That means that Standard &amp; Poor\u2019s 500 index puts are a good deal. As the index drops, the implied volatility will rise, so the index puts will rise more than the index drops.<\/p>\n<p>The Chicago Board Options Exchange enables you to trade VIX options, but only out six months.<\/p>\n<p>There are ETFs tracking the VIX, such as the ProShares Ultra VIX Short-Term Futures ETF (UVXY). That takes a two times leverage on VIX, but it has a huge tracking error. That means unless it goes your way very quickly, you\u2019ll tend to lose money on it.<\/p>\n<p>My conclusion is that you should use VIX as an indicator of what the market\u2019s mood is and as something that helps you with out-of-the-money puts.<\/p>\n<p>But don\u2019t trade it directly; it\u2019s a real Las Vegas sort of game.<\/p>\n<p>This is Martin Hutchinson, signing off.<\/p>\n<p>Smart investing,<\/p>\n<p>Martin Hutchinson<br \/>\nSenior Analyst, <i>Wall Street Daily<\/i><\/p>\n<p>The post <a href=\"https:\/\/www.wallstreetdaily.com\/2017\/07\/11\/will-volatility-continue-flatline\/\" rel=\"nofollow\">Will Volatility Continue to Flatline?<\/a> appeared first on <a href=\"https:\/\/www.wallstreetdaily.com\" rel=\"nofollow\">Wall Street Daily<\/a>.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By WallStreetDaily.com The VIX Index has no pulse. Is this celebrated indicator DOA? Or is it about to awake from its slumber? Also recommended: Nothing drives a stock higher or faster than this\u2026 So the VIX has flatlined. It\u2019s been meandering along in a sideways direction for nearly four years. In fact, the four-year chart [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-108830","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/108830","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=108830"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/108830\/revisions"}],"predecessor-version":[{"id":108833,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/108830\/revisions\/108833"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=108830"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=108830"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=108830"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}