Friday, August 3, 2012

Technical Analysis of the VIX is Silly (VIX)

From Condor Options:
...Earlier this morning, I mentioned on Twitter that:

I think that second point is as good a litmus test as any for whether an investor should be trading options or not. But let’s leave that alone for now.
The first point is that subjective technical analysis on the VIX is just silly. We don’t need to rehash all the reasons why (see the previous link). What is striking, though, is that the forces of misinformation seem to be winning. All I have is anecdotal evidence, but I don’t remember this much muddled VIX commentary even five years ago. Someone sent along a link that led me to charts like this:

Before you scoff, remember that there are people out there risking capital based on analysis like this. I’m not sure how you feign a justified belief based on these lines and candlesticks, but apparently this sort of thing is enough to get a booking on CNBC....MORE
On the other hand (Mar. 27, after the rollout of the VVIX):
The Volatility of Volatility is Not as Volatile as the Volatility (VIX;VVIX)
We first looked at the VVIXSM  Index in "Behold! Fear Squared! CBOE Launches VIX of VIX Index! (VVIX)" wherein we saw the bizarrely titled CBOE White Paper: "DOUBLE THE FUN WITH CBOE's VVIXSM Index" I read the paper and made inquiries of some pretty sharp people and have not figured out how to use the VVIXSM .

I do know that I'm going to get very cranky if the CBOE wants me to use the Service Mark supercript each time I type the symbol.

I also know that today the VIX is up 5.19% while the VVIX trails at up 3.65% which tells me I'm missing something in my analysis of the mood of the mood of the market.

No word yet on when the exchange plans to trade derivatives on this derivative of derivatives.