There are indications that index product volatility is driving single stock volatility, creating a ‘tail wags dog’ situation, according to the latest report from research firm, Tabb Group.
As an option’s value is tied to the expected volatility of the underlying security, the price of an option can be considered an indicator of how volatile the market expects conditions to get.
The volatility index (VIX) follows expected volatility in the S&P 500 Index (SPX). Implied volatility is the measure of an underlying security’s price volatility implied by the option’s market price....