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What Else Ya Got

VIX | A Visual Explanation

What Else Ya Got

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

The VIX is often used a measure of volatility for the overall market. This makes the VIX very useful in that we are able to calculate the expected move of the S&P 500 over the next 30 days, using the VIX. However, this raises the question, how accurate is the VIX at predicting these moves?

Today, Tom Sosnoff and Tony Battista answer this question. First, they show the formula for calculating the expected move using the VIX. Then they guys see how accurate the VIX has historically been at predicting these moves. They find out that it is very accurate but tends to overstate. Next, the guys look at the difference between a low VIX and a high VIX. They find out that both environments overstate the actual moves of the S&P 500 but when the VIX is high, it provides more premium in the options and a larger edge!

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