Is VIX of any use for SPX ?

[earth_imperator]

VIX represents the market's view on expected 30 day volatility (ie. annualized) for the S&P 500 index (SPX).
Has anybody studied the SPX together with VIX ?
Is VIX of any use for the SPX itself?
And how accurate is the VIX since it forecasts the future volatility of SPX ?
Anybody checked the numbers, ie. verified the observed historical values to the historical forecast values?

 

[tomkat22]

Who told you that it "forecast the future volatility"? I think it's like any other lagging indicator in that it only tells you something has happened after it has already happened.

 

[earth_imperator]

Who told you that it "forecast the future volatility"?

Isn't it the same when saying "VIX represents the market's view on expected volatility"?
And that's the very definition of VIX, IMO.
Market here means of course the S&P 500 index (SPX) with its 500 components.

 

[tomkat22]

Did the VIX "forecast" that SVB was about to collapse? Of course it didn't. I think it would be the same with the indexes themselves. If it had I would have placed a MASSIVE long bet on UVXY,VIXY,etc.

 

[earth_imperator]

Did the VIX "forecast" that SVB was about to collapse? Of course it didn't.

Of course not, b/c VIX is about the whole market (of the 500 components), ie. about the SPX index itself only.

I think it would be the same with the indexes themselves. If it had I would have placed a MASSIVE long bet on UVXY,VIXY,etc.

They are independent ETFs, whereas VIX is dependent on SPX, and the question is about this dependence between them, SPX and VIX.
Btw, IMO most ETFs are nothing but scam...

 

[tomkat22]

Yeah but SVB's collapse moved the ENTIRE market. I've personally never found any predictive value in the VIX myself. Maybe ask Calhoun,he trades UVXY a lot I think.

 

[earth_imperator]

Yeah but SVB's collapse moved the ENTIRE market. I've personally never found any predictive value in the VIX myself. Maybe ask Calhoun,he trades UVXY a lot I think.

I think SVB wasn't in the S&P 500 index The moving of the entire market happened b/c of some external forces (for example when the senilovitch in the WH says "God shave the Queen" or so... ), not internal forces within the S&P 500 components itself.

 

[BMK]

Has anybody studied the SPX together with VIX ?

This has been studied extensively.

Historically, VIX has exhibited an inverse correlation with SPX, i.e., when the market drops sharply, VIX would spike upward. It has been used as a hedge against sudden market crashes, and to a lesser degree, as a hedge in a general bear market. VIX certainly spiked when the market crashed in early 2020.

Up until recently, this concept was presented on one of the CBOE web pages. But the page has been taken offline. I have attached an archived image of that page.

VIX no longer behaves this way consistently, and there are many different opinions as to why.

I've attached a Bloomberg article from late last year that addresses this topic.

 

[tomkat22]

I think SVB wasn't in the S&P 500 index The moving of the entire market happened b/c of some external forces (for example when the senilovitch in the WH says "God shave the Queen" or so... ), not internal forces within the S&P 500 components itself.

SVB's collapse ALONE temporarily caused the VIX to spike and the S&P to dip for a few days. It was a big deal(or perceived to be). But the VIX didn't spike until after it happened,thus no predictive value.

 

[tomkat22]

I will say this,the VIX is a very good indicator of general,overall market sentiment and a long bet placed right now on the VIX is eventually gonna pay off because you know it's not gonna stay this low forever.