Visitors Now:
Total Visits:
Total Stories:
Profile image
By ETF Daily News (Reporter)
Contributor profile | More stories
Story Views

Now:
Last Hour:
Last 24 Hours:
Total:

Here’s Why The VIX Is No Longer A Reliable Indicator Of Anything

Friday, October 21, 2016 4:25
% of readers think this story is Fact. Add your two cents.

(Before It's News)

VIXAn overabundance of central banking liquidity and increased regulation in the financial markets have eroded the value of formerly reliable indicators like the CBOE Volatility Index.

The so-called “fear gauge,” the VIX has been on a downward spiral for several years, continually hitting new lows and calling into question its very existence. From Bloomberg:

The CBOE Volatility index, the pulse of market fear measuring the implied volatility of the S&P 500, is becoming more erratic because of the proliferation of exchange-traded products, according to Pravit Chintawongvanich, an equity derivatives strategist at Macro Risk Advisors. These products offer investors exposure to VIX futures and magnify the speed and size of movements in the VIX itself.

“The big rebalance orders associated with VIX exchange-traded products means they are going to exacerbate the daily move in VIX futures, which could in turn impact the VIX,” Chintawongvanich wrote in a note to clients. “So when volatility spikes, it spikes harder, and when volatility collapses, it collapses harder.”

Whether it’s due to overly aggressive central bankers, increased regulation, ETPs, passive investing, or other factors, one thing is for sure: the VIX looks broken, and probably will never be fixed.

The iPath S&P 500 VIX Short Term Futures TM ETN (NYSE:VXX) rose $0.11 (+0.34%) to $32.39 per share in premarket trading Friday. The largest exchange traded product tied to the VIX, with nearly $1.4 billion in assets under management, has plunged nearly 60% year-to-date.

VXX-2016-10-21

You are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)

Report abuse

Comments

Your Comments
Question   Razz  Sad   Evil  Exclaim  Smile  Redface  Biggrin  Surprised  Eek   Confused   Cool  LOL   Mad   Twisted  Rolleyes   Wink  Idea  Arrow  Neutral  Cry   Mr. Green

Top Stories
Recent Stories

Register

Newsletter

Email this story
Email this story

If you really want to ban this commenter, please write down the reason:

If you really want to disable all recommended stories, click on OK button. After that, you will be redirect to your options page.