Posts by jack@benzinga.com

Benzinga increases client engagement & trade-lift with actionable alerts, rumors and unusual activity. Articles cover micro to macro-cap's across all sectors.


The Volatility Index

What is the VIX?

The VIX stands for the Volatility Index, an index formed by CBOE, the Chicago Board Options Exchange. It was originally introduced in 1987 as the Sigma Index.

The VIX is tracks the IV, implied volatility, of S&P 500 options and measures the market’s expected 30-day volatility levels. The implied volatility gives you a snapshot of the market’s opinion at the time.

Why is the VIX Important?

The VIX is used as a tool to gauge the market’s fear. As the S&P 500 becomes more unstable, the VIX spikes and vice-versa. Here is a chart of the VIX and the S&P 500, respectively, from 2008 to 2010. Leading up to 2009, the markets begin to crash. Investors are unsure of the future and have high levels of fear, so volatility spikes. From 2009 to 2010, the markets start to stabilize and the VIX does as well.

This index is given in percentage points and illustrates the expected annual movements of the S&P 500 at a 68% confidence level. This confidence level is used because 68% of the area under a standard normal probability curve is within 1 standard deviation of the mean. If the VIX is at 10, that means the annual change of the S&P 500 is expected to be +/- 10%.

 

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Baltic Dry Index

What is the Baltic Dry Index?

Even if you follow the markets and global economic news, you still may not be familiar with the Baltic Dry Index (BDI) and why it matters.

The Baltic Dry Index is a dry bulk shipping index that tracks the cost of hauling different materials or commodities. It is issued by the Baltic Exchange in London which was founded in 1744.

The BDI is composed of three separate indices – Capesize, Panamax and Supramax. These three indices track the change in shipping costs for dry bulk on different sizes of boats, Capesize being the largest and Supramax being the smallest.

Shipping brokers give their valuation of freight costs of 20 separate routes to the Baltic Exchange daily. These 20 routes include five for Capesize ships, five for Panamax ships, and ten for Supramax ships. On March 1st, 2018 the BDI was re-weighted to: 40% Capsize, 30% Panamax and 30% Supramax.

Why is the Baltic Dry Index important?

The Baltic Dry Index is important because shipping is an important indicator of how the global economy is doing.

The BDI is a very useful gauge of global trade, and tells you how much it costs to move goods around the world in large ships. These goods can be pretty much anything: iron ore, grain, coal, rhodium, silver, copper, and so on. Stuff the world needs to continue developing and building.

As such, analysts whose job is to predict the health and future of the global economy like to pay close attention to it.

It is commonly used as a so-called canary in the coal mine for the state of the world economy and how well international trade is doing. If the price of the BDI is low, it suggests that trade is slowing down.

This matters because BDI drops have historically predicted economic crashes.

 

For more information about Indices Datasets, please visit our data catalogue at https://cloud.benzinga.com/cloud-product/indices/.

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Consumer Confidence Index

What is the Consumer Confidence Index?

The Consumer Confidence Index, or CCI, Survey is an index by The Conference Board that measures how optimistic or pessimistic consumers are about the economy in the near future. The Consumer Confidence Index is based around the idea that if consumers are optimistic, they will purchase more goods and services than if they are pessimistic. This increase in spending stimulates the economy as a whole.

The index is a barometer of the health of the U.S. economy and is based on consumers’ perceptions of current business and employment conditions, and their expectations for business, employment, and income for the next six months.

The Consumer Confidence Index is based on the Consumer Confidence Survey, which is a survey of 5,000 households. The survey asks five questions: two are about present economic conditions, and the other three are related to future expectations of the economy.

The CCI is one of the leading economic indicators for the U.S. economy. Leading indicators are used to monitor current economic situations, and act as warning for turning points in economic activity.

For more information about Indices datasets, please visit our data catalogue at https://cloud.benzinga.com/cloud-product/indices/.

 

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