Why is the VIX so low if people are still uncertain?

stock777 · Jul 6, 2009

college_trad3r meant 90% of participants AM short.

Less than 5' 7" I'm told.

opt789 · Jul 6, 2009

The VIX is 29 and the 20 day historical volatility is about 21 and you are asking why the VIX is low?

bentedges · Jul 6, 2009

Quote from college_trad3r:

people are selling ALOT of calls. This pushes down the price of calls. Market makers who are long calls are then to hedge themselves with puts.
This pushes down the price of puts.

When a move in a direction is clear, the vix will drop!

90% of market participants is now short.

LMFAO! The ignorance of some is just amazing...but always good for a laugh!

You really need to read a few books and try to grasp some relatively simple concepts before posting any further.

"It is better to remain silent and be thought a fool than to open your mouth and remove all doubt."

spindr0 · Jul 6, 2009

Quote from dagnyt:

There is no possibility that this is true.

the vast majority of 'market participants' own mutual funds, don't understand how the market works, are not capable of understanding what 'short' means.

If 90% of market participants are short and 80% of options expire worthless then are 72% of investors dead midgets???

(my apologies to all live midgets reading this)

randy33 · Jul 6, 2009

To me the title makes no sense. VIX is up when people are fearful. It is reflected in the price of hedges ( S&P option prices are used in the calculation in this case). VIX is up when there's prevalent fear. VIX is also up when the market is mildly optimistic. VIX reached 30 today, generally consider as benchmark of high volatility.

stock777 · Jul 6, 2009

Quote from bentedges:

LMFAO! The ignorance of some is just amazing...but always good for a laugh!

You really need to read a few books and try to grasp some relatively simple concepts before posting any further.

"It is better to remain silent and be thought a fool than to open your mouth and remove all doubt."

There would be only 3 or 4 posts here a month if that rule was followed

dmo · Jul 7, 2009

Quote from randy33:

To me the title makes no sense. VIX is up when people are fearful. It is reflected in the price of hedges ( S&P option prices are used in the calculation in this case). VIX is up when there's prevalent fear. VIX is also up when the market is mildly optimistic. VIX reached 30 today, generally consider as benchmark of high volatility.

What evidence do you have that the VIX is up "when the market is mildly optimistic?"

Johno · Jul 7, 2009

Quote from dmo:

What evidence do you have that the VIX is up "when the market is mildly optimistic?"

Perhaps Randy33 is suggesting that the VIX should be viewed with the broader picture in mind. It can reflect bullishness or bearishness at any level as these conditions are generally relative!
For my evidence simply pull up the VIX and S&P and compare!

Regards

Johno

jwcapital · Jul 7, 2009

Quote from college_trad3r:

people are selling ALOT of calls. This pushes down the price of calls. Market makers who are long calls are then to hedge themselves with puts.
This pushes down the price of puts.

When a move in a direction is clear, the vix will drop!

90% of market participants is now short.

Market makers are typically long calls, short puts and short the underlying--taking the other side of the retail investor, who sells calls against the underlying (covered calls), and who buys puts for insurance. As the writer stated, there is a great deal more call selling..this pushes the VIX down. Theoretically, the number of puts can still be high, but if the number of calls goes up, then the VIX appears to drop.

Johno · Jul 7, 2009

Quote from jwcapital:

Market makers are typically long calls, short puts and short the underlying--taking the other side of the retail investor, who sells calls against the underlying (covered calls), and who buys puts for insurance. As the writer stated, there is a great deal more call selling..this pushes the VIX down. Theoretically, the number of puts can still be high, but if the number of calls goes up, then the VIX appears to drop.

By what mechanism does this push the VIX down?

Regards

Johno