How does VIX index influences forex and USA stock market

Discussion in 'Newbie Questions' started by lucacrebbe, Jun 21, 2018.

  1. lucacrebbe

    lucacrebbe Trader

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    I have red that VIX index is the volatility index. My question would be: How does it influence the forex and the stoks market?

    In those days interest rates have been rised, but the market has reacted not so bad in the end, well how did perform the VIX about this situations?

    Also I have red about people who have invested in VIX index... I donìt know if it is a indicator for volatility or it is simply a index fund

    Sorry for the noob question
     
  2. jellyeb

    jellyeb Active Trader

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    Basically through VIX futures or straddle option strategy which make volatility subdued. But it also increase risks of sharper plunge during turmoil
     
  3. Enivid

    Enivid Administrator Staff Member

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    VIX is a measure of the expected stock market volatility based on S&P500 options values.

    Some traders also use it to measure the expected volatility (or "riskiness") of the Forex market, assuming that low VIX means risk-on mode (risky currencies appreciate), while high VIX means risk-off mode (safe currencies appreciate).

    You can trade VIX via VIX futures.
     
  4. lucacrebbe

    lucacrebbe Trader

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    Sorry Why VIX low shoud be a risk indicator? The volatility of the stock market is a trheat for currencies? Can I ask you why?
     
  5. Enivid

    Enivid Administrator Staff Member

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    The volatility of the stock market is usually a sign of some bigger problem, which makes investors shun "risky" currencies and flock to "safe" currencies.
     
  6. lucacrebbe

    lucacrebbe Trader

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    Traders that trade VIX futures influence the volatility? Why does it it also increase risks of sharper plunge during turmoil?

    so they would buy safer currencies, such as dollar, or Euro for example?
     
  7. Enivid

    Enivid Administrator Staff Member

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  8. Enivid

    Enivid Administrator Staff Member

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    Yes - USD, JPY, CHF.
     
  9. lucacrebbe

    lucacrebbe Trader

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    I red that usually when there's volatility in the stock market they refuge themselves on Gold, Metals, silver
     
  10. Enivid

    Enivid Administrator Staff Member

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    Gold does not seem to be a popular choice for refuge during risk-aversion since the financial crisis. Industrial metals (such as copper) are even more sensitive to risk and will drop when investors see any danger to the global growth.
     
  11. lucacrebbe

    lucacrebbe Trader

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    thank you for answer, I always red about gold as refuugee thing periods of crash market

    What's been the Gold performance in the history during the market crashes?
     
  12. Enivid

    Enivid Administrator Staff Member

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    See the attached chart of XAU/USD vs. S&P500. As you can see, the are some periods of gold/stocks positive correlation. Financial crisis of 2008 is one of them. gold-sp500.png
     

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