How is the VIX Like the Cost of Insurance?

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Oct. 31 (Bloomberg) –- Swan Wealth Advisors Director of Trading and Investments Mark Sebastian discusses the VIX on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)


I want to bring in our guest.

As we mentioned, the vix is also called the fear guage, but you say it is better described as the cost of insurance.

What do you mean by that?

You have to understand what it really comes from.

It is derived from s&p 500 options, trying to achieve a constant duration of 30 days.

They are always expiring.

The vix index holds options from two months to get a constant duration of 30 days.

It is trying to judge, how expensive is it to buy portfolio insurance?

How much is it going to cost me to buy puts.

That is what the vix is telling us.

Where are we seeing levels now?

It closed at 13.75. on an annualized basis, the market is acting the s&p 500 to move 13.75% over the next 30 days.

Expecting the s&p 500 to move that much?


So basically, that is a relatively low volatility number.

The long-term mean of the vix is around 20. if you look where the vix is the most, it is around 13. a vix of 13.75% is relatively low.

I'm getting an education here.

When you say participants expect the s&p to move 13.5%, it does not mean straight up or down.

It means the moves up and down with equal 13.75%. right.

We are talking about volatility.

Movement up or down, 13.75%.

This text has been automatically generated. It may not be 100% accurate.


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