Thursday, August 23, 2007

S&P 500 is more volatile than the Nasdaq?!

A new and unusual trend is developing with the nasdaq volatility index falling (VXN) below the S&P 500 volatility index (VIX) as seen in their ratio (see below) being less than one. Is this the beginning of a period in which we see more volatility in the larger cap industrials, I doubt it. More likely its just due to a recent repricing of risk in the financials which are a much larger component of the S&P. This is telling us that in general buying options on nasdaq stocks is cheaper and more attractive than on S&P stocks. Or conversely, selling options is more attractive on the S&P. Anyhow, this is a rare event historically and worth thinking about in my opinion.


Disclosure: I own QQQQ puts

1 comment:

pythagoruz said...

Mystery trader bets market will crash by a third:
http://www.financialnews-us.com/?page=ushome&contentid=2448565379

It wasn't me!