The CBOE Volatility Index (.VIX) is little changed despite another big move in the Dow Jones Industrial Average. With ten minutes left to trade, the Dow is down 120 points and has now experienced triple digit moves in five of this months eight trading sessions, or more than half the time. Yet, VIX is up just .41 points to 21.58 and the lack of movement in the “fear gauge” might be due to the fact that today’s weakness is primarily in large cap financial stocks and other groups, like small caps and tech shares, are holding steady. For example, the Russell 2000 Small Cap Index (.RUT) and the Semiconductor HOLDRS (SMH) are higher on the day.
VIX might also be distorted somewhat due to the options expiration. Although VIX options don’t expire until the 20th this month, the last day to trade many index products, including the S&P 500 Index, is tomorrow. Some players might be closing out shorter term SPX puts ahead of the expiration. This unwinding of hedges might explain why the CBOE Volatility Index, a gauge of expected volatility priced into S&P 500 Index options, is not moving higher amid two days of losses for the major averages.
Category: All Indexes
About the Author (Author Profile)
Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.