CBOE Volatility Index (.VIX) $24.69 +1.44%

| July 20, 2009 | 0 Comments More

The CBOE Volatility Index (.VIX) is up .35 to 24.69 despite a 6.2 point gain in the S&P 500. VIX normally falls when the S&P 500 moves higher. There are a few possible explanations for today’s abnormal behavior in the volatility index:

1) Today’s strength is possibly a technical reaction after a 7-day slide pushed the VIX to 9-month lows of 24.34, 2) The options expiration might distort the readings in the VIX today and tomorrow. VIX July options expire Wednesday, 3) The recent decline in the VIX pushed it below the SPX actual volatility, which has been rising. The 20-day historical volatility of the S&P 500 is approaching 25, up from about 20 at the start of the month. Since VIX measures the expected volatility of the S&P 500, it is unlikely to deviate too far from the actual or historical volatility of the index, 4) Event risk–while this week’s economic calendar is light, Fed Bernanke is before the House and Senate Tuesday and Wednesdy. Meanwhile, the earnings calendar is very busy this week, including TXN after market today.

Please see The Week Ahead for the rest of this week’s “event risk”.

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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.

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