ETF Trends
ETF Trends

Fearful investors have added to the volatility and dramatic price swings of stocks, exchange traded funds (ETFs) and the overall market.

This volatility, which is used as a gauge in investor sentiment, can be measured by the Chicago Board Options Exchange S&P 100 Volatility Index, or the VIX.  This indicator is derived from prices of options of the S&P 100.  High levels of fear in investors can be reflected by high VIX levels, while low levels indicate widespread complacency.

But that’s the new VIX – there’s an old VIX with some telling numbers, too: it’s been showing that investors today have been more fearful for longer than they were before the October 1987 market crash. The old VIX climbed from the start of September through Oct. 11, when it surpassed 100 in intraday trading for the first time since the month of that crash, states David Wilson for Bloomberg.

When comparing the old VIX for this year with the old VIX during the 1987 crash,  the gradual increase in the VIX as opposed to the more abrupt decline in stock prices, or increase in VIX, in 1987 is indicative of the degree of economic problems and the concerns with the global banking system states Michael Shoul, Chief Executive Officer of Oscar Gruss & Son Inc.

The “new VIX” was introduced five years ago when the CBOE changed the formula it uses to calculate the index, reports Mark Hulbert for MarketWatch. The current version uses the S&P 500 and includes more contracts in the calculations.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.