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The Volatility Index (VIX) Explained - YouTube
Channel: ClayTrader
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maybe you've heard of the VIX or this
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thing called the fear gauge what exactly
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is it what is it telling us how is it
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influenced I'm clay let me explain
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[Music]
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now the official title is the CBO which
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is the Chicago Board Options Exchange
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Volatility Index oh yeah the VIX if you
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want to sound cool if you want to sound
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like a trader just people tell the VIX
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is doing this or the VIX is doing that
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and that is what you're actually
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referring to so what is this actually
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telling us well as I alluded to at the
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beginning it is the fair gauge meaning
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it's pretty much giving you know kind of
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the market and everybody an insight into
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the feelings of the market are people
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feeling scared are people feeling
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anxious or people just kind of not
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scared everybody's feeling calm so how
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does all this work well let's just kind
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of walk through a little story here and
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let's say that Tom here he believes you
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know what this whole idea towards the
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market is you know what I think the
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market is gonna be going down so that is
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his thought market I don't know if that
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shows up or not let's try that again
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there we go so he thinks the market is
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gonna go down I would just so that
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represents the market there that is on
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its way down uh-oh but because Tom cares
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about is money
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tom is gonna say okay is there anything
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I can do to hedge my risk to keep my
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risk under control to kind of protect
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myself is there anything I can do out
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there if I think the markets gonna go
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down or maybe not know because nobody
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ever knows but he believes or he's a
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little worried about it going down is
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there anything that he can do you know
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can there can I do anything to maybe
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make my life a little bit easier and
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yeah there is he could then go and use
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and step into the world of options now
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options I'm not going to go down that
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rabbit hole they're just they're like
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stocks they're a derivative out there a
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derivative just means they are there
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and derived from the price of something
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else but just realize that there's
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another vehicle out there called options
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and he can use options again to help
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just alleviate to help protect himself a
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little bit from the market going down so
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what the VIX is telling us is that what
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happens with the VIX is if enough people
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join Tom thinking oh I think the markets
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are going down I'm getting little shaky
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oh well okay is there anything like do
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ya and everybody knows that options
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exist well what's that going to do for
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more people that start to use these
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options because they markets going to go
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down that's going to cause these option
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prices and stuff to expand and expand so
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in other words people have to pay more
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from the options point of view in order
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to protect themselves in order to
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protect against the risk
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so therefore the VIX when a lot of
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people so let's just call it Lots equal
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nervous so when a lot of people are
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nervous that is going to send the VIX
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higher and higher and higher because you
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have a lot of people that are nervous
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and they are going to use options and
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the more people that buy something the
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more people that are using something
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right that's just basic supply and
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demand the higher those prices are going
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to go so therefore the VIX is gonna go
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up when a lot of people are nervous and
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that's the exact opposite reason why if
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the VIX is down low well then there's
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not a lot of times out there right Tom
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there's not many times people aren't
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thinking that the markets going down so
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therefore they don't feel like they need
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to protect themselves against anything
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therefore they're not going to be using
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options in that manner and when a lot of
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people aren't using options in that
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manner
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well those prices are going to be very
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mild therefore the VIX will be going
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down in those situations so that is how
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the VIX works and what it's telling us
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is it's telling us how many people are
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starting to protect themselves how many
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people are getting a little anxious and
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nervous out there and again fearful
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hence the fear gauge because well
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they're now using options to do certain
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things within the options market so the
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more times you have out there that just
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means that the more of the market is
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nervous and the more that the market is
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nervous the more options are going to be
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in play and the more options that are in
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play the higher prices and the higher
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it's going to cost to protect yourselves
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and that's what's going to cause the VIX
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go up so that's what the VIX is that's
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how it works that's how it's all
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influenced so at the more at the end of
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the story at the end of the day the
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moral the story is that the higher the
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VIX is that's just implies the more
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nervous people are out there as a you
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know market as a whole the lower the VIX
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is that just tells me well yeah people
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aren't very nervous people aren't very
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scared people are just saying hey you
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know everything's perfectly fine so
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that's what the VIX is telling us and
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that's how it all works first off thanks
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so much for watching the entire video
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real quick before you go I want to
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invite you to a live webinar web class
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training workshop online event whatever
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you want to call it but it will be me
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live revealing to you what I discovered
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that has allowed me to transform myself
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from being an employee to being my own
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boss
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including how I had only one losing day
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out of 73 days in total I'm going to
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cover three keys that have helped me
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unlock profitable consistency within the
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markets the first key is super-weird but
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in a productive type of way the second
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key is super awesome because it quite
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literally is wired into our DNA as
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humans making it very easy to use but in
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a cruel way this becomes a pitfall for
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many traders I'll explain it although
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including how to avoid the pitfall that
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it creates for some and yeah the third
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key when you hear it sounds way to get
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way too good to be true
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but it's not and I'll show you how it
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all works then at the end I open it up
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for a question-and-answer session that
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is again totally live even if you can't
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make the live session please still sign
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up as it will be recorded and you can go
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back and watch the replay then I will
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send you click the image on the screen
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or click the link down in the
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description box so you can get the date
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and time and claim your spot which I
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should know is limited due to the fact
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that this truly is a live event if you
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have any questions let me know
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if not I'll be seeing you soon
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