By Lawrence G. McMillan

During the last market decline (basically, during all of September and a little bit in October), $VIX just wasn’t too “worried” about the decline in stocks. Yes, one can see, from the chart of $VIX, that it had been slowly rising since the beginning of September, exactly in line with the downtrend in SPX which began at that same time. However, except for the one spike upward in mid-September, $VIX didn’t rise sharply. Perhaps if the decline in stocks had accelerated, $VIX would have responded better, but in reality, $VIX did not prove to be much of a hedge against losses in the stock market during this most recent stock market decline. This happens from time to time, the worst case probably being December 2018.

It is important to remember that one cannot trade $VIX itself. Often, one hears TV commentators talking about small movements in $VIX as if one could trade them. But one cannot. The only things that can be traded are...

Read the full article, published on 10/22/2021, by subscribing to The Option Strategist Newsletter now. Existing subscribers can access the article here.