On Thursday, many eye catchy events that would draw a savvy investor’s attention. The Nasdaq lost over 2.1%, Dow was off about 1%, and The S&P 500 dropped about 1.5%. Many investors would like to watch these, but there are others that shifted more than the ones listed above.
S&P Volatility Index, often known as the VIX. It measures the possible volatility in stocks till the next 30 days; it achieves this by analyzing the market activities for puts and calls. These are the derivatives that cause one to be in line with a certain stock or index over a given period in the future.
The higher the VIX, the greater the anticipated volatility
Since 1990, the mean closing price of the VIX is 19.5. Over the thousand trading days, it has closed 10.0 just in 28 days. And 19 days out of these 28 days have come to be this year. According to the VIX, volatility is anticipated to be low.
The VIX has received many presses lately with several persons saying their opinion about the cause of the low VIX. However, VIX took another shape this week whereas there was an average of 3% daily increase or decrease in July.
The average this month has risen to 8.3%. It went up to 44% on Thursday, closing at 16.04. The last time the VIX closed at such high was No. 8, 2016 when the presidential election was held.
It’s not apparent what’s happening, but the war of words between North Korea and the US seems to play a part in the VIX condition.
Who knows what’s next? Maybe the stocks go sideways while nothing happens or international conflict causes a reduction of stocks. Possibly, Congress puts its act right and passes tax reforms and cause an increase in fattening corporate coffers. Any way it goes, investors should strengthen themselves for any of these possible outcomes.