Jul 7, 2005

London Bombings and the Markets

I don't think the markets have ever seen a 15 pt gap in the S&P index with an 11 handle on the VIX. That will probably lead to a gap in volatility prices when option markets open. The heads on CNBC are reminding people of the fast recovery the markets had after 9/11 and the Madrid bombings but the 11 VIX makes today completely different. There is a much higher risk that the vol increases from such a low level will lead to a very deep and sharp pullback that accelerates over the next few days.

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