Options Jive

Volatility Environment: Market Moves

| Apr 26, 2016
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    Options Jive

    Volatility Environment: Market Moves

    Apr 26, 2016

    Is there a relationship between high or low implied volatility (IV) as represented by the VIX and movements in the S&P 500? The study, as Tom noted, was putting context to what we call opportunity and volatility.

    A 10-year study was conducted using SPX (S&P 500 Index) and the VIX (Implied Volatility Index) in 45 day windows. We compared different VIX levels to SPX moves of 0-2.5%, 2.5%-5%, 5%-10% and 10% and above. A table of the 45-day SPX increases of 0-2.5%, 2.5%-5%, 5%-10% and over 10% and where the median VIX was at the beginning of that period was displayed. The table showed that the larger SPX market increases occurred in higher levels of IV (the greatest extremes in fear).

    A second table displayed the 45-day SPX decreases of 0-2.5%, 2.5%-5%, 5%-10%, greater than 10%, and where the median VIX was at the beginning of that period. The table showed that the largest downside market moves have come from times when the market was more complacent relative to the largest upside moves.

    For more on the relationship between the VIX and the SPX see:

    Watch this segment of “Options Jive” with Tom Sosnoff and Tony Battista for the valuable takeaways and other important information from this game changing study on the relationship between market moves, both up and down, and volatility.

    This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.

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