Wednesday, November 24, 2004

VIX hits low

VIX - an index computed from the implied volatility of a basket of SP500 options - is at a 9 year low (Jan 1996). Perhaps the SP hitting new highs after Bush's election has led to option selling to lock in gains - this would depress the price of volatility. If you are bullish on equities, now is the time to buy cheap call options. Interestingly, bank value at risk (VAR) is reportedly rising even though the volatility input has gone down - meaning more money at play chasing returns.

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