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Stock Market Volatility Remains Elevated  Thumbnail

Stock Market Volatility Remains Elevated

Volatility measures the frequency and magnitude of price movements, both up and down, that a financial instrument experiences over a certain period of time. The more dramatic the price swings in that instrument, the higher the level of volatility. Volatility can be measured using actual historical price changes (realized volatility) or it can be a measure of expected future volatility that is implied by option prices.


The CBOE VIX Index is a measure of expected future volatility. 

The VIX was the first benchmark index to measure the market’s expectation of future volatility.

The VIX Index is based on options of the S&P 500® Index, considered the leading indicator of the broad U.S. stock market.

The VIX Index is recognized as the world’s premier gauge of U.S. equity market volatility. The VIX Index estimates expected volatility by aggregating the weighted prices of S&P 500 Index (SPX) puts and calls over a wide range of strike prices. Specifically, the prices used to calculate VIX Index values are midpoints of real-time SPX option bid/ask price quotations.

Looking at the big picture, the VIX has remained above its long-term average of 20 for most of 2022. 

He's a monthly chart of the VIX going back 30 years for a visual of the volatility expansion. 

Zooming in for a closer look at the last 5 years, here is a chart with weekly data points. While implied volatility has been elevated this year, it still hasn't spiked like it did in March 2020. 

Getting even more granular, looking at the past year with daily data points, we see the volatility expansion has remained elevated, but it has also cycled in a range. The range has remained on the upper end. 

A VIX of 25 tells us the options market is pricing in an implied, or expected, volatility of around 1.6% daily price range over the next 30 days. 

So, when you see a stock index trend up or down around 1.6%, it's expected to. 

But if the S&P 500 (SPX) moves more than 1.6%, then prices are spreading out more than expected. 

By and large, the stock market has been in a volatility expansion for most of the year, so we should expect to see prices spread out. 

Bear markets are littered with waterfall declines and face-ripping rallies — so they should surprise no one.

If you need help managing volatility, get in touch!

Mike Shell is the Founder and Chief Investment Officer of Shell Capital Management, LLC, and the portfolio manager of ASYMMETRY® Managed Portfolios. Mike Shell and Shell Capital Management, LLC is a registered investment advisor focused on asymmetric risk-reward and absolute return strategies and provides investment advice and portfolio management only to clients with a signed and executed investment management agreement. The observations shared on this website are for general information only and should not be construed as investment advice to buy or sell any security. This information does not suggest in any way that any graph, chart, or formula offered can solely guide an investor as to which securities to buy or sell or when to buy or sell them. Securities reflected are not intended to represent any client holdings or recommendations made by the firm. In the event any past specific recommendations are referred to inadvertently, a list of all recommendations made by the company within at least the prior one-year period may be furnished upon request. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities on the list. Any opinions expressed may change as subsequent conditions change. Please do not make any investment decisions based on such information, as it is not advice and is subject to change without notice. Investing involves risk, including the potential loss of principal an investor must be willing to bear. Past performance is no guarantee of future results. All information and data are deemed reliable but are not guaranteed and should be independently verified. The presence of this website on the Internet shall in no direct or indirect way raise an implication that Shell Capital Management, LLC is offering to sell or soliciting to sell advisory services to residents of any state in which the firm is not registered as an investment advisor. The views and opinions expressed in ASYMMETRY® Observations are those of the authors and do not necessarily reflect the position of Shell Capital Management, LLC. The use of this website is subject to its terms and conditions.