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Tag Archives: hicago Board Options Exchange Volatility Index

AN UNHEALTHY PATTERN

As I write in mid-afternoon, the Chicago Board Options Exchange Volatility Index (popularly known as the VIX) has just hit a nine-week low. So what?

The VIX is a good yardstick of investor anxiety. When investors are fearful, options writers charge buyers a high volatility premium. As the mood eases into complacency, the VIX falls. It’s normal for the VIX to drop as the stock market rises. (Nothing like a rally to soothe folks’ nerves.) During the rally off the March lows, however, we’ve seen a pattern that troubles me.