CBOE VIX Hits 10 Year High – Does it Matter?

I’ve been waiting for the CBOE VIX (volatility index) to spike. Well, it spiked all the way up to 42.16 earlier today. This took out the last high of 39 in September 2002 and was just shy of the August 1998 high of 44.28. You can check out Yahoo! for the historical price range since January 1990. We are in rare times here for sure.

In the past, these spikes have come in line with near term bottoms in the markets. What is never known until after the fact is the jump to the new highs is as high as it’ll go or if it has more room to run. A few months ago we would’ve thought anything over 30 would be a good indicator. Now we’ve seen 40+, although briefly.

My account serves as testimony to the volatility in the market. Just today I’ve bounced up $2,200 before 10:00 am and then after lunch was down $2,500. At 3:45 pm I’m up over $3,400. That’s nearly a $6,000 change ($78,500-84,500) in less than three hours.

So far, with one day remaining before my September options expire, I think the few naked call trades I made this week to bring in more premiums (approx. $500) were good trades. AA, CMI and VIP are all below the new strikes. I will have to do some serious thinking to decide which long positions I keep after tomorrow. I’ll detail how my September option positions finish up either tomorrow or Saturday. Clearly, it’s not a pretty month for me, but this afternoon has helped.

More on this topic (What's this?)

How to Profit From Volatility Through One Simple Investment (Investment U, 1/19/10)

Art Cashin Warns on the VIX (Wealth Daily, 1/13/10)

Research Bleg: Commitments of VIX Traders (Condor Options, 1/28/10)

VXX (All Allan, 1/22/10)

Read more on Volatility Index (VIX), Chicago Board Options Exchange (CBOE) at Wikinvest

Comments (4)

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4 Comments »

Comment by kadena

alex, hang in there… regardless of uncle sam’s shenanigans, we are individually responsible, believe me i know, he didn’t bail me out last year, and he won’t bail you or any other private investor/trader out, so think things through, and do the right thing.
Comment by Praveen

I am thinking that, with the new government bailouts, this is probably a high for volatility, and it will probably trend down.

Maybe you can play this trend by putting on some less risky credit spreads.

That might allow you to avoid these wild swings.
Comment by Alex Fotopoulos

I think you are right about the gov’t possibly soothing some downside risk, but I won’t be sold on the recovery until the real indicators start showing it (jobs, new housing starts, etc).
Getting out of some of my long positions will help too. I’ve not done many spreads in the past and might have to start.
Comment by Jessie Self Esteem

i think things are much worse than we are being told, a lot of the talk outside the mainstream media i have heard is about a total collapse of the us economy within 2-3 years. Invest in gold if you can afford it.

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