The VIX – or fear index is sitting below 20.00 and some are claiming this means the markets are showing signs of a recovery. However, in fact more options trades are being done on shorter terms than the VIX represents, so it is possible the VIX is broken as a distressed market signal.
Perhaps no surprise to see the CBOT will be releasing a new index, based on zero day options, where nearly half of all business is being written.
So today we discuss the rationale, and consider the consequences. Perhaps the existing VIX is giving a false signal!
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