馃攳
What Is the VIX and What Does It Mean??? - YouTube
Channel: unknown
[0]
hi dan ferris editor of extreme value
[3]
published by Stansbury research here and
[6]
today's video is inspired by the VIX and
[9]
the VIX is talked about a lot these days
[12]
and you don't really hear many people
[16]
explaining what it is or what it means
[19]
and I'm willing to bet that most people
[22]
watching this video don't know which is
[24]
okay I certainly didn't and so I looked
[27]
into it a couple years ago in September
[29]
August in September of 2016 and just did
[33]
a little studying and talked to a fellow
[35]
named Russell Rhodes who was the I
[38]
believe he's the director of educational
[40]
programs at the CBOE the exchange that
[44]
kind of runs the VIX and publishes the
[46]
VIX and calculates it and and updates it
[50]
every several minutes and learn a few
[54]
things that I think are probably useful
[56]
for you so that you understand what it
[58]
means when when the people in the news
[61]
say you know the VIX is fifteen or
[64]
twenty or thirty today or whatever it is
[66]
so that's we're gonna talk about the VIX
[69]
and we'll start just with a general idea
[72]
so the general idea is that the VIX is
[75]
made up it's it's the output of an
[78]
equation and the initial input is option
[80]
prices putting call options on the S&P
[84]
500 and there are more than 23 days out
[88]
and less than thirty seven days out and
[91]
the average out to about thirty days and
[94]
you know historically speaking when the
[97]
the VIX is called the fear gauge because
[100]
when the S&P 500 falls majority of the
[103]
time most of the time the the when they
[108]
ask to be 500 falls the VIX will rise so
[111]
we call it the fear gauge right I hold
[113]
the VIX is way up that means investors
[114]
are afraid they're buying lots of put
[116]
options it causes the mix to spike and
[119]
so people generally believe that you
[123]
know the VIX will go up when the sp500
[124]
goes down and that's pretty much right
[126]
in fact it's right about 80 percent of
[130]
the time so it's not right a hundred
[131]
percent of the time it's right about 80%
[133]
of the
[133]
and that was one of the first things I
[135]
learned from Russell Rhodes at the CBOE
[137]
and so it explains you know some days
[140]
when you see the VIX in the market going
[142]
in the same direction the mix in the S&P
[143]
500 if they're both going up it's not
[146]
that unusual especially on small moves
[150]
so that's that and you know actually
[155]
what is the VIX well it's the output of
[157]
a bunch of complicated math really you
[159]
you input about a hundred and fifty or
[161]
200 options on the S&P 500 the options
[165]
prices and you you know there's a group
[170]
that's you know more than 23 days out
[172]
and there's a group that's less than 37
[174]
days out and they kind of put these two
[176]
groups together and they do a combined
[178]
weighted average and they then they make
[182]
that into a square root multiply it by
[184]
100 and and it really should have a
[187]
percent next to it that's the ultimate
[188]
output that you see published when the
[190]
VIX is 15 it means 15 percent means the
[194]
options market is looking out 30 days
[195]
and thinks that there's a chance that
[202]
the S&P 500 will rise or fall at a 15
[208]
percent annualized rate over the next 30
[211]
days so then you you you know if you
[217]
want to get to the actual amount that
[222]
the market thinks it will rise and fall
[225]
you can you know to get that monthly
[229]
figure you can just divide the VIX by
[233]
the square root of 12 which is like
[234]
three and a half or something and if
[237]
it's 15 I wrote it down here because I
[239]
wouldn't know it off the top nice you
[244]
know you you divide by the square root
[246]
of 12 and so basically at 15 the VIX
[253]
says there's a 68% chance of the S&P 500
[257]
rising or falling by about four point
[259]
three percent over the next month 15
[262]
divided by three about three and a half
[263]
three point four six or something like
[265]
that
[267]
and then you can do the same thing for a
[269]
weekly calculation by dividing by the
[271]
square root of 52 which is about 7.2 and
[273]
at 15 you know there's 68 percent chance
[276]
of S&P 500 rising or falling by about
[279]
2.0 8% over the coming week or so the
[283]
options market seems to be signaling
[285]
obviously it doesn't the options market
[287]
doesn't know the future so that's really
[291]
that's that's what it is when you see
[293]
that number published it's a it's a
[295]
belief that that the sp500 is going to
[298]
move at an annualized rate of whatever
[301]
the VIX is over the next month and it's
[308]
it's it's not you know it's a guess it's
[313]
it's almost like a sentiment indicator
[315]
this is what people the sentiment in the
[318]
options market thinks of the stock
[321]
market human nature is such that when
[328]
stocks fall of course people start to
[331]
get scared so they buy more put options
[332]
and the VIX spikes I mean it's it's you
[335]
know it's just really how this how these
[338]
two things work together an interesting
[341]
fact about all of this or an interesting
[344]
aspect of it all is that volatility of
[348]
course is just up-and-down movements you
[351]
know why is the VIX geared so much
[353]
toward downward movements well it's just
[355]
because the nature of equities you know
[359]
it's people mostly just let equity
[363]
prices go where they're going to go and
[365]
they don't get too scared but then when
[366]
they fall they start getting scared so
[368]
they buy a lot of put options and it
[369]
causes the VIX to spike and in fact
[371]
there are volatility indexes on other
[373]
assets like oil for example that are
[377]
published by the CBOE as well and do in
[380]
fact reflect volatility in whatever
[384]
direction so they're they function more
[388]
as a pure volatility kind of indicator
[391]
and that's really that's what the VIX is
[395]
it's it's the output of an equation that
[397]
is the product of a bunch of
[401]
inputs from the options market options
[403]
on the S&P 500 index and it outputs this
[408]
expectation that the market is going to
[410]
move by some annualized rate over the
[414]
next month and that annualized rate is
[416]
that VIX number that you see published
[419]
every day so that's what the VIX is and
[422]
I hope you'll you know you'll keep that
[425]
in mind
[427]
as you see that number published and I
[430]
hope that the meaning of that number
[432]
kind of helps you out a little bit and
[434]
and makes you realize that it's not a
[438]
perfect it's not a perfect thing in fact
[441]
the VIX is not really the VIX is not
[444]
volatility it's just a way of gauging
[448]
volatility in the equity market and the
[452]
equity market as represented by the S&P
[454]
500 you know so it's all it's all sort
[459]
of you know as good as they can make it
[461]
but it's by no means perfect so
[464]
sometimes you'll see the VIX going up
[466]
when the market is going up and
[468]
sometimes you'll see the VIX going down
[469]
when the market is going down but that's
[473]
that usually doesn't happen on the big
[476]
moves down you Wilson you're highly
[478]
likely I believe to see the VIX going up
[482]
so I hope that helps you understand the
[484]
VIX a little bit more and and thanks for
[488]
tuning in and I'll talk to you again
[490]
real soon bye-bye
Most Recent Videos:
You can go back to the homepage right here: Homepage