Quote:
Originally Posted by John Kicklighter
I updated the carry trade report this week; and the condition indicators are giving interesting readings - especially after Thursday's massive selloff in equities, rise in default swaps and rally in commodities. Ultimately, the carry was only moderately impacted - probably because so many yen and swiss crosses are still near the highs of recent rallies.
As for the VIX, it is a good gauge for overall risk in the financial markets. However, it was specifically for the equities market; so using it for currencies would thereby need to rely on the carry/equities correlation. To make a more FX specific, we actually created our own volatility index (we dubbed it the DailyFX VIX - original, huh?) based on implied volatility in currency options. We have already applied it to a lot of research and have found that it is a good indicator for the market.
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Hi John,
I am new to this forum and have enjoyed your very insightful columns... Now on your variation of the VIX - back when I was trading options on equities.. We used to remember it as: When the VIX is High - it's time to Buy and when the VIX is low - It's time to go...!! Would that be a similar situation with your VIX or opposite. Thanks in advance.. - A.J.
