options trading vix
The VIX is the implied volatility for the next 30 days, the index option contracts on S & P 500. The aim of this article uses in the VIX to determine market participants fear or lack of fear (ie, market sentiment).
When investors are worried that the stock market go down or are trying to avoid further losses, people get to buy. When people put a lot of demand, demand is greater than supply, therefore put prices up. When prices go up options, implied volatility rises and therefore the VIX index rises.
In contrast, when market participants do not fear the market heading down, people will abstain from buying puts. Less demand, lower prices, lower VIX.
Sometimes, when everyone is bearish, the VIX is high, these are good times to buy stock. The reasoning is that if everyone is bearish, no one else to sell. No vendors, no more downward pressure on stocks. A visual image of the inverse relationship between the VIX and the price shows this concept well: Vix Index.
Similarly, when everybody is bullish, the VIX is low, these times are excellent points to exit long stock positions. Logically, if everyone is bullish, then no one else to buy. Without buyers, there is no upward pressure on stocks.
In summary, the VIX is an indicator Otherwise great. The mantra of the merchants, after all is "When the VIX is high, it's time to buy when the VIX is low, it's time to go."
Another closely related indicator analysis is Techical volatility indicator. This indicator measures the volatility of actual prices rather than future option implied volatility.
Tom Markelson is a contributor to the website http://www.OnlineTradingConcepts.com/TechnicalAnalysis.html with a background in stock, futures, and options.
Symbols that generally does not pay attention to for trading stocks and options?
For trade in general? I've heard VIX and OEX options …. Anything else?
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