Monday, November 5, 2012

"Volatility the Likely Outcome of Elections" and "How High Might the VIX Spike?" (VXX)

The VIX is at 18.68 up 1.09 (6.2%).
First up Barron's The Striking Price column:
Investors are buying VIX options in anticipation of lower stocks regardless of who wins the White House.

The most sophisticated investors in the stock market are casting early ballots for Tuesday's presidential election. The expected outcome, regardless of who wins the race, is more tumult in the stock market.
This is the message emanating from the Chicago Board Options Exchange's Volatility Index (VIX). The fear gauge, as VIX is known, is edging higher Monday even though the stock market has stalled ahead of Tuesday's election.

"Overall, macro accounts seem to be positioning for downside while real money remains on the sidelines, outside of clean-up rebalancing for month's end," Credit Suisse advised clients in a premarket-trading advisory.

Macro accounts refer to sophisticated hedge funds that tend to have global views and trading strategies. Those funds are considered on Wall Street to be the most sophisticated of all investors. Real money refers to mutual funds and pension funds, many of whom are adjusting their portfolios because so many of those funds close their books Oct. 31....MORE
And from VIX and More:
Given all the drama in the euro zone, not to mention the fiscal cliff, the various difficulties in China, continued unrest in the Middle East and Northern Africa, etc. it is more than a little surprising that the CBOE Volatility Index (VIX) has failed to trade above 30.00 this year.

In fact, with a maximum VIX of just 27.73 for the year, 2012 could mark the first time in 15 years (if one excludes the great Greenspan liquidity bubble from 2004 – 2006) that the VIX has not made it out of the twenties.

How does 27.73 compare as an annual high in the VIX? Since 1990, the mean high in the VIX has been 37.90 (inflated somewhat by the 2008 high of 89.53), while the median high VIX has still been a reasonably lofty 35.93....MORE