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Market Extra: Historic jump in Wall Street’s ‘fear index’ in February sounds a stock-market warning

February’s historic surge in a prominent gauge of stock-market volatility may have ushered in an end to a protracted period of calm on Wall Street, but it also offers a worrisome sign about market structure during times of extreme turmoil.

According to a Goldman Sachs research note dated Monday, high-frequency traders, which employ lightning-fast computers to execute trades, aren’t prone to step in the stem the bleeding during market selloffs. The bank cited February’s spike in the Cboe Volatility Index VIX, +4.20% which is calculated using options on the S&P 500 SPX, -2.52% is a measure of expected, or implied, volatility over the next 30 days, as an example of a point in which liquidity seemed absent.

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