29 October 2009

High Stakes VIX Bet

The story of the day from the options trader's perspective is not the crimson red condition of the stock indexes, it is the VIX pumpage into extremely oversold levels as detailed by Bill Luby.

Adding poignancy to the situation I have been lured into a wager with Mark over at Option 911. The bet is that VIX will hit 30 before it hits 17. Convinced I would have my ass handed to me, I obtained very favourable odds; the payout, something moderately embarrassing if I lose compared to something really really REALLY embarrassing if Mark loses.

Right now, I'm feeling quietly and unexpectedly confident. :)))

N.B. - Neither Mark nor I are likely to be fooled by the randomness of such a wager, just a bit of frivolity folks.


Anonymous said...


interested in some stats concering your bet ?

The VIX closed at 24.76 on 10/29/2009, so Mark needs a VIX loosing at least -31.35% first before the VIX could gain +21.17% (intraday basis).

First of all: The VIX shows a statistically significant tendency (t-score exceeds -1.645 on the downside) for trading lower between the last business day of October and the then following 40 trading days (6 years with a higher, 13 years with a lower close 40 sessions later).

Since 1990, there were 6 occurrences (years) where the VIX lost at least -31.35% between the last business day of October and during the then following 40 trading days (regularly at Dec. 31), and 8 occurrences where it gained at least +21.17%. Occurrences are disjunctive, means there was not a single year where the VIX did both.

Maximum (intraday) higher high: +67.78%
Maximum (intraday) lower low: -41.84%

Stats can be found here: http://twitpic.com/ni7mq

Twitter: TradingTheOdds

Wayne said...

Thanks Frank,

That's very interesting.

Interesting blog too :)


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