Why a VIX Spike Causes Bids for Stocks to Disappear

The VIX, or volatility index, is a valuable indicator of stress within capital markets. When the index spikes, bids for stocks are dropped, which can cause prices to plummet overnight. When a geopolitical crisis causes higher volatility, there are few buyers anymore looking to bid for value stocks on weakness. As a result, the VIX can quickly overwhelm other factors and lead to abrupt declines in the major stock indexes.

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Dan Amoss

Dan Amoss, CFA, tracks aggressive accounting and other red flags that markets miss. He’s a student of the Austrian School of economics and Daily Reckoning fan since 2000. Agora Financial relies on Dan for macro market commentary as well as profitable plays like his 2008 call to readers to buy Lehman Bros. puts, which...

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