Following the fluctuations of the CBOE Volatility Index (VIX)? This post offers the latest video clips on the VIX’s recent drop and an educational guide to understanding the index generally.

Seems like the VIX, or “fear index”, can always be counted on to start a conversation among traders. After hitting sky-high levels during the financial crisis last fall, and maintaining historically high levels since then, the VIX dropped substantially this week, after Fed chief Ben Bernanke’s statement that the recession may “very likely be over”.

So what does this mean for individual traders? I got a chance to talk through the implications of this drop on two TV venues this week, FOX Business and Bloomberg TV (scroll down to the segment entitled “Market Outlook – The Fear Factor of Volatility”).

I’ve blogged quite a bit about the VIX. If you’re looking to educate yourself on what has become one of the most closely-watched indices, here’s a quick tour of those posts:

Decoding the VIX explains the basic mechanics of the index and how the options based on them work. Don’t forget to read Decoding the VIX II for the second half. VIX options and expiration is also a handy read for anyone seeking to trade these options.

In a WSJ interview, I warned against the deadly VIX calendar spread, a trade that can be really tough to exit successfully. Another trade that poses difficulty for many trades are VIX-based futures. My post Back to the (VIX) futures helps explain why.

To put the recent VIX gyrations into historical perspective, check out The VIX: “50 is the new 30” , “Fear and Loathing” with the VIX and The VIX’s lowering limbo stick for more background.

And feel free to ask away about the VIX here! I’m always glad to field whatever questions are on your mind lately.

Regards,
Brian Overby
TradeKing's Options Guy
www.tradeking.com

[Image: Old TV Set by tomislav medak on Flickr]

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