VIX Soars Along WIth Gold To Near Term Highs

Gold gained $21 to trade at 1284.10 just hours ago with gains limited by the soaring US dollar. Silver is up 97 points at 17.45 seeing a gain of 0.56% while gold saw a gain of 1.66% and platinum added $9.40 to 976.90. As the vote count in the UK comes down to a conclusion and the Leave camp in ahead by over 3 points markets moved to panic mode. At this moment gold is up almost $100 at 1360.00 and climbing. Market volatility is off the meter. The pound has declined a record 1550 points to 133.27 as the shock continues. The euro is down 468 points at 1.0917 while the US dollar is up 335 points at 96.63.

Like the ocean markets are subject to the ebb and flow of market forces. The so-called “Brexit” vote is considered a rogue wave of tsunami proportions. Everything appears to be on hold until after the wave (vote). (Marketwatch)

The Brexit verdict will be in shortly. This will give European markets and U.S. futures about six hours to digest the news before Wall Street opens for trading.

Just a day ago polls were supporting the Remain camp and the market volatility had eased much lower. Today’s outcome is a global shock sending reverberations across the globe.

Traders may have to brace for heightened volatility in the days ahead amid uncertainty over the outcome of the upcoming vote in the UK on European Union membership

The volatility index (VIX) — a measure of traders’ expectations of near term risks in the market based on Nifty options values — is expected to surge as analysts do not rule out a 5 per cent fall in the Nifty. VIX has climbed 23.5 per cent in the last one week. On Friday, the index ended at 17.35.

“Market volatility is expected to increase. The VIX could surge above 20 levels,” said Amit Gupta, head of derivatives at ICICI Direct.

VIX is a popular measure of implied volatility, a key aspect of options’ premium pricing. Premium is the price paid to buy the option. When there is increased uncertainty over the outlook, implied volatility and VIX rise because traders buy more puts.

Just last week on June 13, the CBOE Volatility Index closed at 20.97, which marked its highest level since late February. Currently, the index is up 2.5% to 18.82.

The VIX is based on prices of S&P 500 options that investors tend to buy when they’re fearful of stock declines, giving the index its nickname, the fear gauge. Technically, the VIX measures implied volatility, or investors’ expectations for stock swings over the next 30 days.

While the VIX has advanced recently, the S&P 500 hasn’t posted a swing of at least 1% since May 24. On Tuesday, the S&P 500 added 0.2% to 2087.

Additionally, any pickup in actual volatility could lead to an even bigger spike in the VIX, some analysts say.

“If the VIX can be catapulted into the 20s with no signs of actual realized volume, an actual volatile selloff, whenever that comes, could drive volatility sharply higher,” according to a note by Rocky Fishman, an equity derivatives strategist at Deutsche Bank. After the “Brexit” vote, he recommends buying protective S&P 500 options that expire in September as a hedge.

Financial markets have been extremely volatile in what has been a neck-and-neck battle in this referendum. The biggest loser in this race has the British pound, which has lost 7.8% against the U.S. dollar, hitting an overnight low at $1.365.