vix divergence from spx

1.) Most funds have already shut-down for the year and the Holiday Season results in lower volatility.

2.) There has been a "bid" under the market that has countered the previous "tone" of the market where massive liquidations were taking place back in October and November. Thus far in December, downside gaps have been bought, and so has a lot of "bad" news off of a short-term double-bottom that got put in in the SPX at 815 (Dec. 1st ) and 818 ( Dec. 5th ).

3.) We just went through a Quadruple Witching, which significantly effects the implied vols.

4.) Placing a lot of weight on the VIX as a market direction predictor can be VERY hazardous to your financial health.
 
Quote from scriabinop23:

Priced in? Listening to the MS conference call the other day, they said their CMBS are trading 40c on the dollar (pricing in 60% default rate).
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DAMAGE to banks balance sheets is no way yet priced in if the commercial real estate default rate starts a mean run....:)
 
Quote from opt789:

People have a tendency to misinterpret the VIX. It is quite simple, two things send the VIX up and two things send the VIX down. The SPX market makers in Chicago will raise implied volatility in the options when the SPX is moving a lot and when people buy options from them. They will lower implied volatility when the SPX is not moving much and when people sell options to them. Then the VIX is calculated by a rather convoluted formula, which is detailed in a white paper on the CBOE site.

The VIX has been going down because the SPX has basically stopped moving the last few days while we are stuck in this narrow trading range. The VIX is always a lagging indicator, sometimes a concurrent confirming indicator, and only rarely in the hands of a knowledgeable, experienced trader a leading indicator.

It amuses me when I read all the conjecture on this site when anyone who has been an option market maker understands it implicitly.

The actual volatility (otherwise known as historical or realized volatility) on a 10 day basis is in the 40s. The VIX is in the 40s. There is no “divergence.”
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you're right there was no divergence at at all....
 

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Quote from rc5781:

you're right there was no divergence at at all....
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Thank you for posting, everyone here is now stupider for having read your ludicrous attempt at sarcasm.
It is no surprise to me that so many people here fail to actually make a lot of money. When you posted you were trying to say there was a divergence in the VIX which was not true, but there was a very interesting anomaly several days ago. I am guessing you have no idea what it was or how to make money from it. Here is my p/l for the day, what is yours?
 

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