GO
Loading...

Nothing To Fear, But Fear Itself

Monday, 1 Jun 2009 | 4:59 PM ET

The stock market had a banner day today, despite the fact that General Motors- one of America's most storied corporate icons - officially filed for Bankruptcy.

A couple key positive economic data points and it was off to the races.

But a curious thing happened on the way to Market Nirvana - the VIX actually rose. Usually on such up-days, the Volatility index tends to drop, as fear seeps out of the market. But today, despite the stock euphoria, the VIX actually rose, and according to one member of our show, it was again driven by fear, but this time of a different sort: the fear of missing the rally.

According to Brian Stutland, "Options Action" star, and as President of Stutland Equities, a "VIX Merchant Extraordinaire," the gains in the VIX today were driven by options traders who were buying out-of-the-money calls in the hopes of catching-up to this massive rally.

"The VIX has maintained upward pressure due to the significant call buying today in which traders are beginning to fear they are missing the rally and need leverage to get into the game. Because call buying in the S&P 500 equates to premium buying of options, the price of the VIX remains elevated as it reads the price of premiums people are willing to pay on the next 30-days worth of options in the S&P 500 index," said Stutland.

In the end, much like cholesterol, I suppose there is good fear and bad fear.

More Great Coverage On CNBC.com Including

Questions, comments send them to us at: optionsaction@cnbc.com

  Price   Change %Change
GM
---
VIX
---

Contact

  • Showtimes

    Fridays, 5:30p ET
    Saturday, 6a ET
    Sunday, 6a ET
  • Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

Latest Video

Options Action Daily Reports

Sponsored Related Links

More on thinkorswim by TD Ameritrade

  • Make sure you’re always keeping up with the market with up-to-the-minute news and breaking stories. Move on possible breakout stocks and options with potential opportunity. Plus, get in-depth analysis on futures and forex in one seamless, integrated experience. Join TD Ameritrade and trade commission-free for 60 days + get up to $600 cash.

You Make the Call

  • Mike Khouw, Options Action trader, shares his view on News Corp stock on the heels of testimony from Rupert Murdoch before British Parliament.

  • Do you have a question for the Options Action team? Options Action selects a viewer's question and gives the answer on the show's Make The Call Web Extra video.