Why the VIX Keeps Investors on Edge | WSJ

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Since the financial crisis, the Cboe Volatility Index — also known as the VIX — has been considered an early warning signal for market distress. But how does it work? WSJ explains. Photo Composite: Tom McCarten for The Wall Street Journal.

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Wall Street in a nutshell:
_Can I bet on that?_
Wall Street: Sure can do!

Dear_Mr._Isaiah_Deringer

There are loads of YouTube videos explaining this topic but this is hands down the best: engaging, clear and logical. Thanks!

ryanb.

Wall Street: Hmm let me make an index to better track performance of indexes and stock so I can make better decisions
Also Wall Street: I'm betting on that index now

ladhkay

Wow, this is better than my 2 hour lecture which taught me nearly nothing.

JamieCYW

Is there an option to bet on a bet on a bet of a bet? ‘Cuz, you know, diversification.

KevinConwayChannel

The guys who invented how the options are priced (and therefore how volatility is measured) I believe they won #NobelPrize in economics. Later, they created an explosive hedge fund called #LTCM.. Which almost broke the back of the market in 1997 -1998. They were being highly leveraged and exposed themselves to BIG risks. And once the volatility increased during the Asian and Russian economic crisis in the late 1990s, they were badly exposed. They could have brought down several big banks that is why the FED interfered to unwind them. Look them up on #Wikipedia #LTCM. I believe a book was written about them. I wish a movie could be done about them.
The market never learned from what happened then.

AbuSousPR

Zero-sum games always favor the fee collectors. Me, I am holding out for the 3rd order derivative above the VIX.

carstars

They should have given this reporter a set of Crayola Crayons to do this report. The price of the vix is reactive to price moves... it predicts nothing.

esquire

How WS works: Selling papers out of thin air("securities") to people who want to bet(gamble).

Stewie

"When the VIX is high, buy"

Ronenlahat

If people are betting on the VIX (and I agree they are betting) is it really even investing? What if we were talking about the NFL? We might say the owners have invested in the team, but would web also say the gamblers betting on the team were investors? I think the distinction lies in whether profit and loss is made based on the profitablity of a company or on the bets of other gamblers. Most of your retirement fund relies on accumulating money from other gamblers to operate.

MatthewStinar

Too scary for me, I'll stick with divvys.💰💰💰

CGoffgrid

Anyone know how much those 'small premiums' might cost? Haven't done my research. My guess is %15 stock share value based on 100-85 example.

FruitfulPerspectives