VIX

VIX is a weighted average of the out-of-the-money SPX options in the first two expirations, and adjusted to simulate the volatility of an option with 30 days to expiration.  It is never wrong since it is a calculation using actual bid/ask prices of these SPX options. 

If the VIX is going up, then the out-of-the-money options in the calculation are rising from trader’s accumulation (demand); likewise, the VIX drops from trader’s distribution (supply).

If the market is moving lower, but traders are not bidding up the out-of-the-money options (VIX doesn’t rise), then traders are already hedged, or are less leveraged, and the extent of a sell-off is not perceived as intimidating to them.

Use the VIX to complement your trading strategies rather than to predict market direction.  Compare the change to the past few weeks to gauge the overall fear or complacency in the market.  If the VIX is rising above the past trend, then uncertainty is increasing in the market over what may happen in the near term future; likewise, if the VIX is falling below the past trend, then complacency is increasing and option premiums are relatively low.

U.S. BANKRUPTCY

U.S. bankruptcy is imposed by a court order, often initiated by the debtor that cannot repay the debt it owes to creditors.

Corporations and other business forms file under Chapters 7 or 11.  Complete loss of Equity holder's Investment results in Chapter 7 and can result in Chapter 11 proceedings.

The most common types of personal bankruptcy for individuals are Chapter 7 and Chapter 13. As much as 65% of all U.S. consumer bankruptcy filings are Chapter 7 cases.

There are six types (chapters) of bankruptcy under the Bankruptcy Code, located at Title 11 of the United States Code:

• Chapter 7: basic liquidation for individuals and businesses; also known as straight bankruptcy; it is the simplest and quickest form of bankruptcy available.
• Chapter 9: municipal bankruptcy; a federal mechanism for the resolution of municipal debts.
• Chapter 11: rehabilitation or reorganization, used primarily by business debtors, but sometimes by individuals with substantial debts and assets; known as corporate bankruptcy, it is a form of corporate financial reorganization which typically allows companies to continue to function while they follow debt repayment plans.
• Chapter 12: rehabilitation for family farmers and fishermen.
• Chapter 13: rehabilitation with a payment plan for individuals with a regular source of income; enables individuals with regular income to develop a plan to repay all or part of their debts; also known as Wage Earner Bankruptcy.
• Chapter 15: ancillary and other international cases; provides a mechanism for dealing with bankruptcy debtors and helps foreign debtors to clear debts.

PERMANENT OPEN MARKET OPERATIONS (POMO)

The Fed influences short term interest rates by controlling the interbank lending rate known as the Fed funds rate.  Through its Open Market Operations (OMO), it purchases (adds reserves) and sells (drains reserves) short term repurchase agreements (RPs) with dealers in Treasuries by the Trading Desk of the Federal Reserve Bank of New York to maintain just enough reserves to the banking system to meet the target rate demand.

Permanent Fed reserve additions/drains (POMO) is just one of three tools used by the Federal Reserve to implement monetary policy.  The other two are the discount rate and reserve requirements. Open market operations are conducted by the Federal Open Market Committee (FOMC), while the discount rate and reserve requirements are set by the Federal Reserve's board of governors.