The VIX closed yesterday at 25.07%, at the top of its typical range of 17.0% to 25.0%, but well below the 45% to 50% levels touched in 1998. Thus, is the market only moderately nervous at this point? According to our research, the VIX (also known as the "market fear gauge") appears to be understating market worries a bit....

Get the rest of the article here:

http://www.valueline.com/news/opt-000218.html

-- Farouk Madjurian (fmadjurian@hotmail.com), February 29, 2000

Answers

Farouk Madjurian,

Thanks for the link.

Option premiums would indicate markets are still in a speculative mode, right?

It looks to me that the FED will have to raise rates by more than 1/4% to get anyones attention. Or gas shortages, rationing and/or long lines at the pump could also bring our vulnerability into quick focus.

-- Bill P (porterwn@one.net), February 29, 2000.

Bill said this:

Option premiums would indicate markets are still in a speculative mode, right?

From the Article:

Another reason for these high premium levels may have been that investors appear to have become very defensive buying equity puts, having lost confidence in 1998 in the effectiveness of indexes as hedges.

Sure the market is in a speculative mode, and very much more speculative than we have ever known. The premium is partly due to the overall volatility of the dot.coms among other things. It is little snapshots of these anomolies that is even as a jigsaw puzzle; eventually as the pieces come together an overall impression of the final outcome is apparent.

-- Frank Jensen (fmadjurian@hotmail.com), February 29, 2000.

Sorry for the error. Frank Jensen is simply a business acquaintance.

Farouk

-- Farouk Madjurian (fmadjurian@hotmail.com), February 29, 2000.