What is a Volatility Shock? What Causes Them? Why Should I Care?

If you are an investor in the stock market, you should care, and this is why.

 A volatility shock occurs when there is a sudden and drastic change in the CBOE Market Volatility Index (VIX). On February 5^th, 2018 a volatility shock occurred and $1.837 Billion was lost in trading with just one asset according to Bloomberg and on top of that, the S&P 500 lost over 4% of its value in a single day. 

This event has been called Volmageddon, Volatility Tsunami, Volpocalypse, and many other non-friendly sounding names. The Market Volatility Index doubled in just one session. This happened right after a year, 2017, where the market made gains in each and every month with record low volatility. 

If you are a stock market investor, you will want to know what causes these events so you can learn how to avoid their wrath.

Watch this excerpt taken from an ODDS Online coaching session. You’ll hear options trading and market probability expert Don Fishback discussing the cause of modern volatility shocks.