VIX in 2013 Looks Like VIX in 2007 (so far…)

In the VIX world, the first half of 2013 has been very similar to the first half of 2007.  I know 2007 is a very distant memory for all of us after the market behavior of late 2008 and early 2009, but those who do not learn from (or remember history) are doomed to repeat it.  So here is a quick rundown of how after six month of market action in the books for 2013 the year is mirroring what we saw in 2007.

First, check out the table below which shows some important numbers for 2007 and 2013 as far as VIX price action goes –

VIX 2007 2013 Table

The range was a bit wider and the low a bit lower in 2007, but the first half of 2007 and the first half of 2013 are strikingly similar regarding how VIX traded.  Keep in mind back in 2007 VIX over 20 was a rarity.  The chart that gets my attention is below.  The blue line is the full year of daily VIX closes in 2007 and the red line represents the first six months price action in 2013 for VIX.  Two things are worth noting.  First the red and blue lines show a similar volatility market in the first half of 2007.  Second, note the second half of 2007 and a couple of spikes in VIX that I have circled.  VIX made it to the 30’s in 2007.  With the right mix of concern about the global economy or another unforeseen event we could see the same thing in 2013.

2007 2013 VIX Chart

I guess the point is don’t let the quiet of the first half of 2013 lead to too much complacency about the second half of 2013.  History can repeat itself.

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Russell Rhoads, CFA

CBOE Options Institute

Russell Rhoads, CFA, is a Senior Instructor with the Options Institute at the Chicago Board Options Exchange. He joined the Institute in 2008 after a career as an investment analyst and trader with a variety of firms including Highland Capital Management, Caldwell & Orkin Investment Counsel, TradeLink Securities and…

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