"Construção" de proposta de reforma da lei laboral vai para consulta "definitiva" de parceiros, anuncia ministra

[MarcoAntonio]

O problema de tentarmos prever topos com base no VIX é que ele pode andar anos por volta destes valores (com os mercados sempre a subir) tal como fez na década passada.

Um abraço,
Ulisses

E até pode subir para valores mais altos ao longo da subida, tal como também ocorreu na década passada.

Aliás, isso é expectável que venha a acontecer em boa medida.

[Keyser Soze]

THE STRIKING PRICE DAILY
By STEVEN M. SEARS

December 20
VIX Looks Lifeless but It Still Works!

http://online.barrons.com/public/articl ... weekday_r1

LONG BEFORE OPTIONS TRADING entered the mainstream, the Chicago Board Options Exchange's Market Volatility Index, or VIX, was widely cited for its ability to telegraph how sophisticated traders thought the stock market would behave over 30 days.

With the VIX stuck for much of this year near 14-year lows, Credit-Suisse's strategists decide to a run a test to see if the VIX can still accurately signal market direction.

By converting the VIX into an oscillator, Credit-Suisse determined that the VIX is actually able to forecast the stock market's direction. Among the reports' findings, low VIX signals "achieved a 57% correct batting average, while high VIXs called the market correctly 63% of the time."

The VIX, which was recently down about 2% at 10.08, is based on the implied volatility of Standard & Poor's 500 Index options.

"We backtested whether the VIX actually does forecast market direction, and it actually does; it works, which is surprising," said Stephen Chadwick, the head of the firm's quantitative trading and derivatives strategy group.

After determining VIX's 186-day moving average, the firm divided that number into the VIX's current level, and determined VIX has about a 10% predictive power over the Standard & Poor's 500 Index's five-month return.

In the current session, VIX is 21% below its 186-day moving average, which the firm interprets as a sign that traders and portfolio managers should exercise "extreme caution."

Indeed, with the VIX at all-time lows, many contrarian traders are a bit cagey about the market's future direction at a time when the Dow Jones Industrial Average remains at record high territory. These traders reflexively like to buy fear, and sell confidence, and with the VIX at such low-levels it would seem to suggest the market is poised to decline. But rather than wondering about the market's trajectory, Chadwick said the message in the VIX is that the chance of a sharp rally is not high, but the chance of a sharp sell off is possible.

Volatility, of course, is a key determinant of options prices. When volatility is low, it means options prices are generally low. So rather than selling stock when VIX is low, Chadwick said it may be better to buy defensive puts.

"It's kind of a no-brainer. You have a situation where the indicator is saying the market may not do anything or sell off, but it's also saying volatility is really cheap. Why not take advantage of that to cover your assets?" Chadwick said.

[Ulisses Pereira]

O problema de tentarmos prever topos com base no VIX é que ele pode andar anos por volta destes valores (com os mercados sempre a subir) tal como fez na década passada.

Um abraço,
Ulisses

[Keyser Soze]

November 21, 2006

Special Report on Implied Volatility...
by Mark McMillan


Intraweek Alert
11/21/2006 9:04:59 AM

Today's intraweek Fundamental Trader contains a backgrounder on implied volatility.

This is an important subject as Monday's close of the VIX was at a low not seen since 1994. This has ramifications for the market, generally, and specifically to the SPYders.

To that end, we are going to cover several subjects today, to uncover the usefulness of implied volatility. We need to define stock options, volatility, before we can define implied volatility, even though the two are not directly related. Finally, we will introduce some indexes which track implied volatility, and which may be used as indicators for trading highs and lows in the market.

Stock options provide the holder of the contract the right to buy (or sell) the underlying shares of a stock at a given strike price over a given period of time. A call option conveys the right to buy, and a put option conveys the right to sell the underlying shares of the stock. Key elements of the options contract are the strike price and the expiration date for the option.

Volatility refers to a changing value of a financial instrument, or rather the standard deviation of the change in value, with a specific time horizon. Stocks, when they are bought, sold, or sold short, do not have a specific time horizon associated with them. Options contracts, on the other hand, do have such a time horizon.

Volatility may be used to quantify the risk of an option contract over a time period. For an option (or other financial instrument), volatility increases by the square-root of time as time increases. (In actuality, this measure is modeled from a Gaussian walk, which doesn't quite match actual moves, but is sufficient for this dicusssion). This means that volatility four months out is statistically likely to go twice as far as a move one month out. This relationship is the square root of 1 = 1, while the square root of 4 = 2. So 4 months = 2 times the likely move as 1 month.

Finally, actual volatility may be derived from current trading, while historical volatility would refer to financial instruments past trading history. Implied volatility looks to the future, and is derived for options contract price premiums.

The term, implied volatility, is derived, rather than calculated. It is derived based on premiums paid for options contracts. A seller of an option contract conveys the right to the buyer of the contract to buy (or sell) shares of the underlying stock at the strike price for a given period of time. If sellers demand a premium for options, this implies that they perceive greater risk that the underlying stock will have higher volatility for the time of that contract. If sellers are willing to accept lower premiums for options, then they perceive that risk of large price moves is low, and the implied volatility over the life of the contract is low.

Therefore, implied volatility is derived from the time premiums paid for options contracts, as all options contracts have some value, based on the strike price relative to the current price of the underlying stock.

The Chicago Board or Exchange (CBOE) has indexes that track implied volatility. The most often referred to is the VIX (CBOE:VIX), which is an index for stock options of the S&P-500 companies. Another is the VXN (CBOE:VXN), which is an index for stock options of the NASDAQ-100 companies.

Let's take a look at a weekly chart of the VIX.




The chart of the VIX shows a high degree of correlation between lows for the S&P-500 (in this case, we use the SPYders (Amex:SPY) as a proxy for that index) and a high implied volatility. There is also a correlation between low levels of the VIX and market highs for the S&P-500. The difficulty lies in calling an exact top.

The current value of the VIX is just above 10, and the lowest level seen on the index (going back to data we have into 1997) is 9.88, seen in July 2005. Will the VIX reverse at that level and move higher, implying a reversal in the SPYders? We can't readily determine that, but it is certainly a level that will be heavily scrutinized by traders.

Let's take a look to see if we can learn anything from the VXN's weekly chart:



The VXN shows similar correlations of a high VXN and lows on for the QQQQs, and low VXN levels with high prices on the QQQQs. Currently, the VXN is trading in the low 15s. The 2006 low was at 14.38 (intraday) in May, while the absolute low was in late August 2005 at 12.85.

The VXN is trading in a descending wedge. It appears that this wedge closes out later this month, but it could easily expand a bit and keep going into the end of this year.

Many traders seem to try to predict tops and bottoms from the level of the VIX or the VXN. We don't believe that it is possible to predict the bottoms or tops from the levels. We do believe that they are a useful indicator that should be monitored at extremes and for patterns. It is the reversals from when these indicators are overextended that tops or bottoms can be successfully traded, and all traders should be aware of their usefulness as an auxiliary indicator.

Please feel free to send emails with any questions you may have.

Regards and Good Trading,

Mark McMillan
Fundamental Trader Alert

http://www.safehaven.com/article-6355.htm

[Keyser Soze]

Growing investor complacency a concern

By John AuthersWed Nov 15, 1:35 PM ET

US equities are powering ahead once more. The S&P 500 is at its highs for the year, while the Russell 2000 smaller companies index, and the Dow Jones Industrial Average, are both at all-time highs. Even the Nasdaq Composite is up more than10 per cent for the year.

The rally looks broad-based, but increasingly analysts are asking how long it can survive. The Chicago Board Options Exchange's Vix index, which measures how much investors will pay to protect against future volatility, is at an all-time low - a sign of complacency.

Merrill Lynch's hedge fund monitor shows excessive bullishness as funds cram in to the S&P 500. Is the market overvalued, and should we fear a correction?

At least one measure answers "yes" to both.

Aronson+Johnson+Ortiz, a Philadelphia fund manager, has for years tracked a simple strategy: buy the cheapest 10 per cent (as measured by the multiple of price over earnings) of the 2,000 largest stocks in the market and sell short the most expensive 10 per cent. Over time this strategy does well. Since the exercise started in 1962, it has gained about 1,200 per cent (8.4 per cent annually).

This strategy is highly unlikely to lose money. It has only done so when the market is truly out of whack, with the most expensive stocks carried forward by their own momentum.

A fall in the AJO strategy indicates a major sell-off is in the works. Ahead of the bursting of the internet bubble in early 2000, it dropped 53 per cent - an early warning of the juddering halt that lay ahead. Since February 2000, it has gained 380 per cent, while the S&P 500 has been flat.

So it should cause concern that the AJO strategy is now falling, for the first time since 2000. It fell ahead of May's correction, and rose thereafter as the rally gained strength, before falling again.

By the end of October, it was more than10 per cent below its peak set early last year. The most expensive stocks are once more strongly outperforming the cheapest.

This is unhealthy. It suggests a correction may be coming sooner rather than later.

[Keyser Soze]

o VIX anda em mínimos

[SuperPikas]

Ok tens razao, mas nestas alturas de panic sell é aconselhavel que baixe. Quandos os bears estiverem em grande quantidade la dentro, e minha conviccao que iremos ter um short squeeze violento.

Cumptos

[fiódor]

Mesmo que a volatilidade baixe não quer dizer que os indices subam.
A volatilidade pode estar em queda e continuar tudo a cair na mesma.

Cumps

Fiódor

[SuperPikas]

Conforme previa o VIX subiu, e os indices foram o que foram.
Amanhã prevejo um belo dia para compras long a cutissimo prazo.

[Jack]

Há quanto tempo já não via uma convera à volta do VIX! lol

O VIX, na minha opinião, não se analisa. Constata-se...

[SuperPikas]

E que tal o Russell 2000. Tambem não está com grande aspecto.

[Sir.Mourinho]

Penso que no curto prazo dificilmente poderá subir mais, amanhã é dia de subida até o VIX o indica, nem tinha reparado nele ainda. Fez bem em falar nele o que raro por estas bandas...

[SuperPikas]

Impressão minha ou amanha ainda vai cair mais.