The VIX doesn’t quantify the expected direction of upcoming market movements, only the magnitude. In other words, it doesn't say if stocks will rise or fall, just that they're likely to move. How to use the VIX The VIX isn’t a crystal ball. But it can still be useful for investo...
For those who track the VIX, it represents an important tool for trading with (and against) volatility. Specifically, traders look at a stock’s beta value against the implied volatility of VIX. A company’s beta represents volatility with respect to the move in a broader market index. A b...
Once the VIX finally breaks the downtrend of “lower highs” and begins to move meaningfully higher, the real breakdown and capitulation in stocks begins. Looking at the dot-com bubble, the downtrend in the VIX was broken in September 2001, and the S&P 500 proceeded to decline another 30% ...
stocks into correction territory by declining 10% or more. President Donald Trump’s decision to move ahead with sweeping tariffs is rattling capital markets. U.S. stocks suffered the largest one-day decline since 2020 on April 3, following President Trump’s sweeping tariff announcement....
Vega is higher for options that areat-the-money(where the strike price is close to the underlying asset's current price) and for options with a longer time until expiration. This is because there's more uncertainty or potential for price movement, which makes the option more valuable. ...
“non-event,” and that the underlying won’t move in the wake of earnings, he/she might deploy a short options position that benefits from a sharp drop in implied volatility after the earnings event. In this case, the big risk is that the underlying makes a gap move, and triggers a...
Just like the Stelvio Pass Road in the Alps, the stock market doesn't move in a straight line. Be careful if you try to profit from the volatility, though. Image source: Pixabay You may know that theBarclays Bank PLC iPath S&P 500 VIX Short-Term Futures ETNis a way to bet with your...
This is a good strategy to use when an investor is mildly bullish on a stock but also wants to protect against a downside move in the stock’s price. By reading this article, investors will gain a better understanding of how to effectively use this strategy to generate a profit. In this...
It is well known that volatilities of asset returns co-move. It is natural to observe common variation when assets are all exposed to the same factors. If financial returns are linear combinations of common factors, time-varying factors will imply a volatility factor structure. However, whatever...
If the underlying asset's price changes, the price for the contract won't necessarily make a big move itself. Cons of LEAP options LEAPs also have some negatives as well. if one is buying LEAP options, those options will lose value over time as the effects of theta, or time decay,...