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There's No Single Number That Tells You a Crash Is Coming. Not Even the VIX.
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ticker lesson
Breakdown
0:00lesson
VIX as uncertainty price tag
- VIX not directional
- Higher VIX = more uncertainty
- Divide VIX by 3.5 = 1 std dev move
- VIX 20 → 5.7% range
- VIX 30 → 8.6% range
2:10lesson
Time horizon volatility comparison
- Compare 9-day VIX vs regular VIX
- August 5th: 9-day VIX 1379
- Regular VIX 1581
- 3-month VIX 1895
- Sloped volatility curve
4:21lesson
VIX limitations for trading
- VIX doesn't predict crashes
- Can't buy spot VIX like stock
- VIX futures/options don't mirror index
- VIX level alone ≠ hedge value
4:22lesson
Hedge construction framework
- Define risk type: market decline/gap/event/spike
- Match instrument to risk: S&P puts/VIX calls
- Set budget for premium loss
- Define trigger/exit conditions
- Plan exit at portfolio loss/volatility level
5:40lesson
When hedging makes sense
- Hedge when single move could cause irreparable loss
- Before known events with defined risk window
- Protection becomes more expensive after fear arrives
- Hedge may expire worthless = insurance cost
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