If anyone wonders why your portfolio feels like it's moving around a lot lately:
$VIX is sitting at 22.
A quick way to estimate the market's expected daily move is to take the VIX and divide it by 16 (the square root of 252 trading days).
22 ÷ 16 = 1.375%
That means the market is pricing in roughly 1.375% daily moves in $SPY. With $SPY around $732, that's approximately $10.07 swings per day.
For context, when the VIX was around 14 earlier this year, implied daily moves were only about 0.875%.
In other words, we're experiencing nearly double the day-to-day volatility compared to just a few weeks ago.
So if your portfolio feels more volatile lately, it's not necessarily because you're doing something wrong.
It's the environment.
@IncomeSharks After Donald Trump’s naval blockade in the Strait of Hormuz which looks more like a desperate move in a war of attrition don’t you think the probability of further escalation has increased significantly? Such a development could easily lead to very severe economic consequences
Not to scare, just to prepare. Sahm Rule has been 9/9 on calling recessions. It's never given a false positive. We've gone from 0.10 in July to an estimated 0.20. At 0.50 it triggers a recession warning. We aren't close yet but unemployment rising is pushing us closer.
My rule of 3 for buying a stock:
1) At least 3 different entries
2) Wait at least 3 days between entries
3) Have at least 3 reasons why you should buy (FA, TA, earnings, catalysts, sentiment)