🛡️ VIX Uncovered

March 06, 2025

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Hello, my Friends!

In today’s session, we’re diving into one overlooked hedging tool in the financial world - the VIX.

Known as “The Fear Index,” the VIX isn’t just an instrument; it’s the heartbeat of market sentiment.

Here’s why it matters:

  • Institutions rely on the VIX as a crucial hedge tool to gauge risk and volatility.

  • News outlets report on tariff delays and other policy moves, which push markets into a “risk-on” mode.

The VIX Unveiled:

  • Record Highs:
    During the 2008 financial crisis, the VIX soared above 80, and in March 2020, amid pandemic uncertainty, it surged to similar extremes.

  • Average Calm:
    In more tranquil times, the VIX typically drifts in the low to mid-20s, reflecting stable investor sentiment and subdued volatility.

  • Evolution and Innovation:
    Originally launched by the Chicago Board Options Exchange (CBOE), the VIX has continuously evolved. Its refined calculation methods now offer an even more precise measure of short-term market expectations.

The trading session signaled potential market reversals, as volatility metrics aligned with significant headlines.

Greed Reversal

Here were some of the headline-grabbers:

  • US Commerce Secretary Lutnick: “Tariff reprieve not likely just about auto makers - likely to include all USMCA-covered products.”

  • “I expect to speak with Mexican counterparties later today.” (CNBC)

  • Canada’s PM Trudeau: “We’re in discussions on possibly delaying the second wave of our planned tariffs.”

  • US Commerce Secretary Lutnick: “My expectation is that April 2nd reciprocal tariff rates start high, and then start coming down.”

These rapid-fire updates aren’t mere background noise; they are the catalysts that drive the market Impulses we track day in and day out.

Its real-time pulse on investor fear and confidence not only guides hedging strategies but also serves as a critical predictor in financial research. Knowledge is your best hedge!

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Until next time,
Steve B
Founder, The Daily Impulse

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