Thursday, October 16, 2008

Please keep all legs and arms inside the vehicle. Enjoy your ride.

So there is this thing we use to measure volatility in the options market (and thus the stock market) called the VIX. It is normally at 20. When things get really scary, it goes to the high 40s. Today, it went to 80, which is the highest it has ever gone in the history of the United States of America.

What this means is that we are likely in for some insane volatility. Think 1,000 point swings. This is especially true tomorrow, which is an "expiry" day when a bunch of options expire. I have no idea what will happen, and I don't try to predict short term movements because that is impossible. People who do that are fooling themselves. Anyway, should that 1,000 point swing happen to all be on the up side, I highly recommend you sell stuff. And if you hadn't gotten around to buying one of those index funds that goes up when the market goes down, like SDS and SCC, that would be a great time to do that.

Should the 1,000 point swing be back forth in the middle or on the down side, I recommend you sit there and marvel at the chaos. Should be an interesting day tomorrow with lots of volume.

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