(MENAFN- DailyFX) VIX Analysis, Price and Chart

• VIX surges nearly 40% on Wednesday as speculative mania soars.
• Retail traders upsetting the status quo.

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The VIX fear gauge shot into life yesterday and jumped by around 40% on the day before nudging lower in early European trade today. The Chicago Board Options Exchange Volatility Index VIX is a ‘calculation designed to produce a measure of constant, 30-day expected volatility of the US stock market, derived from real-time, mid-quote prices of S & P 500 Index call and put options'. A rising VIX warns of heightened volatility ahead, and yesterday's move sent the gauge to its highest level in three months.

A Guide to S & P 500 VIX Index

A cluster of previously unloved US equities are now the new media darlings as a wave of concerted retail buyers forces these companies to extreme highs, damaging the balance sheets of a range of hedge funds and traditional Wall Street firms. These companies, including GameStop (GME), AMC Entertainment (AMC) and Blackberry (BB), and others, were all amongst the most-shorted companies in the market as Wall Street traders expected their stock prices to fall further. However, a huge surge in retail buying, heavily discussed on the reddit WallStreetBets forum, has sent these companies' share prices ‘to the moon' causing the short sellers to cover at a huge cost. With the buyers still looking to buy stock to cover their short positions real-time data on short positions are readily available - and with some options on these companies expiring on Friday, the expectations are for these companies to see another surge in volatility today and tomorrow. With GameStock currently seen over $100 higher than last night's record close in pre-market trading, volatility looks set to jump. In cases like this, there is a real fear of missing out (FOMO) which also helps fuel speculative trades as traders are drawn to the volatility and potential of the next big mover. This can cause a breakdown in trader discipline and needs to be avoided.

How to Deal with FOMO to Become a Better Trader

While the VIX remains a distance below the peaks seen in March last year, it remains within striking distance of recent peaks seen in late-October, early-September, and mid-June last year. Yesterday's move saw the gauge convincingly break through the 200-day simple moving average, breaking the trend of the last three months, and suggesting higher prices ahead.

VIX Daily Price Chart (March 2020 January 28, 2021)

How to Short Sell a Stock When Trading Falling Markets

What is your view on the VIX are you bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1 .

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