Under Construction ![]() Contents: Oct. 2008 | Aug. 2007 In the midst of the 2008 financial market crisis Oct. 10th was particularly volatile.
So you want to be a day trader? Aug. 16, 2007 was an example of large swings during the day with no major news. This appeared to be the bottom of a correction caused by concern over a credit crunch precipitated by problems in the sub-prime lending market. At one time on Aug. 16 the Dow Jones Industrial average was off 343 points or 2.7% from its previous close. But it rallied to close only 15.7 pts. down. ![]()
The Chicago Board of Options Exchange (CBOE) Volatility (Fear) Index (VIX) hit 37 on Thursday Aug 16.; This was the highest since Oct. 2002. It hit 43 in Aug. 1998.
VIX measures market expectation of near term volatility conveyed by S&P 500 index option prices. People buy options to hedge against expected market declines. As investors get more fearful option prices tend go up.
A New York Times article "Pack Mentality Among Hedge Funds Fuels Market Volatility" says "hedge funds with computer-driven or quantitative investment strategies attributed the volatility at the end of day trading." These funds have computer models with similar algorithms. Hedge funds as a whole have grown exponentially and now manage about $1.7 trillion It is these funds (stock funds, pension funds, hedge funds) which are causing the volatility rather than individual investors.
See 2008 Recession for more Return to Investing
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