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Chahine: The VIX Is Broken As A Trading Vehicle

Chahine: The VIX Is Broken As A Trading Vehicle
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Earlier this week, Bloomberg discussed the intriguing situation the VOLATILITY S&P 500 (INDEXCBOE:VIX) finds itself in. The cost of calls related to the VIX are at a nine-year high, the outlet reported.

So what gives?

Benzinga chatted with options expert Nic Chahine about the index.

The "VIX is somewhat broken as a trading vehicle," Chahine explained. "I use it as a gauge for carelessness. Recent sharp drops like [Monday's] indicate a reckless market, which in turn creates the potential upswing in the VIX = market drop."

When the index falls too far to fast, he added, it could signal to investors that is the time to take profits. "I tend to want to book profits and not chase the trends that brought it down especially when those reasons are NOT fundamental," Chahine added.

"The closer it gets to 12 the more likely markets will worry again."

Chart via CBOE.


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