Friday, July 10, 2009
At the risk of oversimplifying a very complex subject, the implied volatility of an option contract can be thought of as a measure of how much people are willing to pay to reduce their risk exposure—in other words, a measure of fear. This chart compares the implied volatility in equity and Treasury bond options. Both measures of fear have declined significantly from their highs of last year, but they are still high from an historical perspective. We're not out of the woods yet, but we're making progress.
Posted by Scott Grannis at 12:07 PM