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Volatility's prolonged absence from the stock market appears to be coming to an abrupt end. After being largely invisible for the past nine months - coinciding with a sharp equity rally - several signs indicate that instability is coming back.
Call options buying recently hit a three-year high for the CBOE's Volatility Index, a popular measure of market fear that usually moves in the opposite direction of the Standard & Poor's 500 stock index.
"We saw a huge spike in call buying on the VIX, the most in a while," said Ryan Detrick, senior analyst at Schaeffer's Investment Research. "That's not what you want to hear (because it usually happens) right before a big pullback."
"On what planet is a CBOE VIX Index reading of 14 a fair assessment of near term stock market price volatility?" Colas said in a note to clients Wednesday. "A planet where Federal Reserve monetary policy still tightly holds the reins of capital markets, unless you have a better explanation of this clearly anomalous reading."
Remember that Congressional insider trading scandal? The one where Congress members were caught trading stocks and bonds on insider information, an apparent crime for everyone else but Congress? Well, after a lot of public posturing leading to the passage of a reform law (with resulting positive press coverage) – Congress is back to their old tricks.
Congress approved a bill Friday to eliminate expanded financial-disclosure reporting requirements for Senior Executive Service members, just days before the new requirements were to go into effect.
The bill indefinitely suspends the filing requirements for 28,000 Executive Branch employees, including SES members. The Senate approved the measure by unanimous consent Thursday evening. The House followed suit Friday.
A call buy, which gives the owner the option to purchase the security at a certain price, implies a belief that the VIX is likely to go higher, which usually is an ominous sign for stocks.
Originally posted by rickymouse
The Stock market is controlled by a hand full of individuals. They pull out most of their money before it gets close to crashing and then use the last disposable profit to collapse the market. They then start all over and get rich. They work with the execs of some hedge funds to accomplish this. This keeps the top one percent well above the rest. It is all a really big scam.
Originally posted by MystikMushroom
This is the first time I've ever heard of this "VIX" thing. Is it some kind of put option/short deal on the stock market?