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Strategies & Market Trends : Option Strategies
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To: Bridge Player who wrote (912)12/20/2013 5:38:41 PM
From: TheNoBoB  Read Replies (1) of 2591
 
Remember that the VIX index doesn't directly measure volatility, but rather the premium S&P500 options traders are willing to pay for downside protection (which is why it's sometimes called the fear gauge). When stocks are falling you have to pay up for that protection, so VIX spikes.

Exercise caution with the structured products designed to track the VIX (VXX, UVXY, etc). They all have a structural flaw that causes them to badly mistrack the actual index. That's why VXX has had reverse splits totaling 1:64, and UVXY 1:600 (!)

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