The Volatility Index or as it is more commonly known the VIX represents the market’s expectations for the relative strength of the S&P 500 Index. The index is widely respected by traders globally as it gives great insight into the market risk and investor sentiment.
But why is the VIX a great asset to trade? That comes from the predictability and the factors that drive the price of the VIX. The highest recorded level on the VIX was on the 23rd October 2008 during “The Great Recession” at 96.40, the second highest was 85.47 recorded on the 18th March 2020 near the start of the COVID-19 pandemic. The VIX can go above 100 however the shock would have to be unprecedented over and above the former two most recent shocks. The VIX can not go below zero. The lowest level the VIX has been since inception is 8. It has a strong inverse correlation with the S&P500, during uncertain times the VIX will rise as the equity market falls, and therefore when the equity market is rising the VIX will normally drop.
If we take a look at technical levels on the VIX, we can see that it tends to range between 15 and 23. Where spikes above or below these levels are short lived or extreme levels that tend to only last for a few days to a week. This gives traders a range that can allow for some great intra day positions, allowing traders to take advantage of the movements between levels and market volatility. This may sound too good to be true and in some regards it is or was until now. The VIX generally comes with a large overnight holding fee and margin requirement for retail traders meaning that it can be a very expensive instrument to trade especially if you plan to hold trades over several days.
We have found a broker that offers the VIX without any overnight fees to the instrument, meaning the trader can hold position over a number of days without mounting costs. That Broker is YLDFX, they are LFSA regulated and based in Labuan. They are a unique type of brokerage who focuses on customer satisfaction and offering a bespoke service to its global client base. Each account holder has a dedicated account manager, clients have a direct email address and phone number to contact their account manager thus removing the annoying call center or multiple call handlers and having to explain an issue repeatedly. It is refreshing to deal with a company whose main focus is customer service and understanding traders needs rather than the dehumanisted approach that many brokers have taken.
They have recently added the VIX to their list of instruments available and made the decision to offer it with no holding fees for the exact reason of traders being able to capitalise on the market volatility without the fear of large overnight fees. They truly are a brokerage that is for traders by traders.
