Volatility Index 20 Year Chart
By Barry Ritholtz - May 25th, 2010, 11:30AM
Given today’s volatility — we gapped down 2.5%, now are climbing to minus 1.5% – today’s lunchtime chart is this fascinating look at the long term history of the VIX, below
As you can see, the Volatility Index is now above the levels it hit during the Bear Stearns collapse, Fannie & Freddie’s Fall, and Morgan Stanley’s wobble. It is near levels reached during the Asian Contagion, LTCM, and 9/11. The VIX remains far below the Lehman/AIG collapse.
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VIX 1990-2010
click for larger chart
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Hat tip Mike S.
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May 25th, 2010 at 12:22 pm
Ah, the VIX. The last true market reflecting instrument in the free world. I wonder when they’ll get a lasso on that thing? It’s making them look bad
May 25th, 2010 at 12:35 pm
All they have to do is keep people from trading options on SPX and they’ll be all set!
There was one VIX expiration period where it looked like someone gamed the calculation method a bit by buying a bunch of contracts at a bunch of strike prices further out at just the right time. While a fleeting thing, I think it did manage to skew the special quotation that the VIX options settle on. Wish I could remember the date…
May 25th, 2010 at 12:40 pm
It seems to me that if you’re a speculator, volatility is a good thing. BR, if the past two years have taught us anything, it is that the market is now run by and for the huge speculator funds (f/k/a large banks). It would seem then that we should get used to this, as it will be the new normal.
May 25th, 2010 at 12:41 pm
speaking of which, no one ever seems to bother with explaining the ‘breakdown’ of that indicator..
~~
no one bothered to ask, “How is it constructed?”
http://cfe.cboe.com/
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=VIX+CFE
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=VIX+CBOE
~~
don’t ask a “Stockbroker”, though, remember: “Chicago owns New York.”
May 25th, 2010 at 12:44 pm
Anybody shorting the VXX? That’s a pretty sure thing if you can do it above $35 though you’d be in for a ton of (pardon the pun) volatility. As you can see this can go into the ’90′s but the move is pretty sharp. Usually above $30 is a pretty sure thing and above $40 is almost a mortgage the farm moment (except that all the farms are already mortgaged but that is a different topic for discussion)
May 25th, 2010 at 12:53 pm
Mark- Reading the white paper on the VIX a few years ago was eye-opening for me. It struck me that most people that comment on the VIX have no idea how it is calculated and what it is supposed to imply in terms of index movement in the 30 day term. And despite the growth in references to the VIX, the understanding does not seem to have kept pace.
May 25th, 2010 at 12:55 pm
It seems to me that if you’re a speculator, volatility is a good thing.
volatility is an option sellers best friend :)
May 25th, 2010 at 1:06 pm
Barry, heard your interview with Tom Keene this morning.
I found myself wondering if we’re forgetting that we should get ready to cr@p our pants over this North Korea thing. North Korea is a nuclear armed country with a not-fully-sane leader who has attacked a South Korean warship with a torpedo. The US gives the South a security guarantee.
There is a small but non-trivial and very *real* possibility of a nuclear exchange coming up. Remember that this is in the vicinity of 3 major powers: China (nuclear), Russia (nuclear), and Japan (not nuclear).
It’s not quite the Cuban missile crisis, because presumably NK can’t launch missiles at more than a few cities on the west coast, and maybe our missile defense systems will work, and maybe NK’s missiles won’t.
The level of risk in the world has just shot up enormously in the past 3 months, while the level of expected return hasn’t. So VIX being high seems pretty sensible to me.
Love your stuff. Keep going!
May 25th, 2010 at 1:15 pm
Mr.Sparkle,
Thanks for giving voice to it..
it’s, too much, like that, and more
May 25th, 2010 at 2:35 pm
Just give it time. (re: vix)
May 25th, 2010 at 5:33 pm
Well, that’s a terrifying chart.
Even more terrifying is this: I think Main Street is finally realizing that nobody who matters knows what they’re doing. And as a result, we’ve got FEAR.
Reading all over the place the DOW is going to revisit 6600.
That’s not a lot of warm & fuzzy for those 401k holders and college savings accounts out there.
.
May 25th, 2010 at 5:41 pm
“Bruman Says:
May 25th, 2010 at 1:06 pm
Barry, heard your interview with Tom Keene this morning.”
Bruman, I missed the interview, is Barry expecting a period of correction or a short one ??
He usually lets us know when he is getting bullish, atleast in the past, and I need to listen when he gets bullish again.
May 25th, 2010 at 8:02 pm
Ah, it’s just another rear-view mirror contraption.
May 25th, 2010 at 10:16 pm
Don’t worry BR…
These are all “typical recovery” readings… Right?
Gee… What did they do after 1998/99?… Repeal of Glass Steagal…
What happened in ’02-’03?… Fed Funds rate at 1% (for too long)…
Guess what maestro? Fed Funds rate is UNDER the 2002/3 levels as we speak… GS? With the new FinRef? HA!…
So ask yourself… Why would VOLATILITY “possibly” be spiking to panic levels of the past? In the past, there were “bazookas” (and other clever things), to keep the wheels greased… Now? TYPICAL RECOVERY?… Keep dreaming my boat shopping friend!
~~~
BR: In terms of consumer behavior (which is what that blog post discussed), yes, it is fairly typical
And 98/99 was not a recession recovery
May 25th, 2010 at 10:19 pm
FWIW…
Within the next 2 years… “CV” see 100-200 (yes, you read that right) VIX levels…
That’s quite a statement… I kno…
May 26th, 2010 at 12:19 am
@BR
Look… I don’t disagree with “mongoloid” chart & graph reading… (Not that I think you do that – I’m not saying that at all)…
What I AM SAYING is that I believe one has to look… WITH EXTREME SKEPTICISM… at any charts & graphs that are being pro-offered these days…
I’m not trying to be POLITICAL here (but I’ll use this as a convenient metaphor)…
Bush used WMD an an excuse to go to war in 2002/3… It’s been “proven” to have been false and basically A LOAD OF CRAP since…
So WHY? Would an INTELLIGENT person read “consumer behavior” charts nowadays and take them at PAR VALUE?
I mean, anecdotal evidence could lead a THINKING person to surmise any number of alternate universes…
- J6P actually BELIEVES the economy is improving because he/she watches “Dancing With the Stars” all day and simply listens to the MSM line that is fed 24/7
- J6P has STOPPED paying credit cards & mortgages (so has a few extra dollars to spend)
- Unemployment benefits have been extended and extended (so we haven’t yet reached the end of the line on that “flow thru”
I could nominate any number of things…
Cv tends to believe “what he senses” – rather than any CHARTS he looks at…
I’ll believe CHARTS when they jive with what makes COMMON SENSE…
& BR
“98/99 was not a recession recovery”… TRUE… But listen… You’d basically be EQUATING the LTCM fiasco with Lehman… Do you REALLY think the two were on PAR? I know I’m over simplifying that but those are the nuts & bolts…
Or think of it another way… WHAT IS THE DEFINITION OF A RECESSION? 2 NEGATIVE QUARTERS OF GDP?… Well then… From my seat – with QE FOREVER – It is highly possible and likely that there will NEVER, EVER BE A RECESSION AGAIN IN THE HISTORY OF MANKIND…
I suppose all a government has to do is PRINT and SPEND… Those two factors alone would skew the numbers mathematically in a way that there would ALWAYS be + GDP (in Keynesian economics)… Right?
Is that how it’s going to work?
Please tell me you’re smarter than to believe that!
May 30th, 2010 at 11:29 am
[...] a volatile week! As shown by Barry Ritholtz earlier this week, the VIX Volatility Index reached the levels it hit during the Bear Stearns [...]
July 11th, 2010 at 7:22 am
An interesting picture of the VIX, and the relationship between the VIX and the SPX, over the past 20 years, can be seen in two “Scribd” documents. The links are below.
VIX Over Time:
http://www.scribd.com/doc/33528321/VIX-Over-Time
VIX SPX Over Time:
http://www.scribd.com/doc/29058287/VIX-SPX-over-time