Aug 25

Fear Creeping Up and may be appearing in Oz

Source: Bloomberg

After another down day in US Equities markets we can see the VIX is starting to creep up…it increased overnight by a little more than 7% and currently stands at 27.5. If the VIX is one thing it is certainly volatile. Whilst the chart shows that over the last 12 months the VIX has moved from 24 to 27.5, it has been as high as 46 and as low as 15..so after more than halving after reaching a peak of 32 it then more than triples to 46 before more than halving again to its most recent bottom of around 21.5…what a wild ride and whilst its an indicator of fear in equity markets there would certainly be a lot of fear in buying or selling the VIX contracts.

Either way, I must say I’m looking forward to seeing an investible Australian version of the VIX indicator that will hopefully be sufficiently liquid so we can efficiently buy and sell volatility. The Australian options market, in my opinion, is still quite illiquid, so having an efficient method of taking a position on sharemarket volatility should be good. I must say, like many, I’ve had little idea about market direction but I’ve been far more confident (and accurate) in my expectations of market volatility…the Australian VIX should be, at least, fascinating and I do expect there will be a new range of structured products that will appear…and let’s hope they’re priced appropriately…well…I guess you can’t have everything.

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