Spread Betting and the Volatility Index
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Market volatility is set to continue through 2011. That is the view of traders who follow the Volatility Index (VIX).
The Volatility Index gauges fear or pessimism in the S&P 500 markets over a 30 day period, providing a measure of expected stock market volatility.
Below City Index shows you how to use the VIX to inform your financial spread betting or CFD trading.
Spread Betting and the Volatility Index: Gauging Fear
“A high VIX indicates trader fear and a low VIX indicates trader calm,” states Joshua Raymond, Market Strategist of spread betting company City Index. In general, the Volatility Index rises during periods of financial stress and falls in less anxious times, giving an indication of the percentage the markets are expected to move up or down by.
For example, in January 2011 the FTSE 100 hit new 32 month highs before falling 4.5%. The Volatility Index is widely seen as a way of predicting this kind of near-term volatility, and so traders who follow the VIX may have been better prepared for the trading activity that ensued during January.
Spread Betting and the Volatility Index: Analysis
The more data you consider, the more chance you have to notice an important detail you might otherwise have missed. Just like fundamental analysis, technical analysis, financial news activity, the VIX is a form of analysis worth considering, but the key is to find a system that works for you.
"Spread Betting and the Volatility Index" last update by R Thomas, 02-Nov-2011
Warning: Financial spread betting carries a high level of risk. You can lose more than your initial investment or stake. Financial spread betting may not be suitable for all investors. Only trade with money that you can afford to lose. Make sure you fully understand the risk involved. If necessary, seek independent financial advice.
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