Wednesday, June 24, 2009

A two sigma day

A two sigma day on the S&P 500, from Condor Options. Click to enlarge.

Here’s a bit of an explanation from Condor:

The lower part of the chart below shows how far each day’s price movement deviates from its 21-day mean; the dotted lines mark two standard deviations up and down. With SPX at 895.70, today looked to be one of those two sigma days. The last such occurrence was on March 2nd of this year, a few days before what the “green shoots” crowd desperately hopes will have been the market bottom. . . .

A two sigma event isn’t outrageously improbable or anything like that. We’re not really talking fat tails here.

Rather, in this case, it just suggests — perhaps — that volatility is returning to the market or momentum is picking up.

Or maybe, it just suggests that stochastic analysis is bunk.

Either way, we think it’s interesting.

No comments:

Lunch is for wimps

Lunch is for wimps
It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another.