May 13 (Reuters) - U.S. stocks extended losses in afternoon trade on Friday, with major indexes falling more than 1 percent. The CBOE Market Volatility index .VIX, Wall Street's so-called fear gauge, jumped 9.2 percent to 17.50.
Trading in futures on the VIX Index began on CBOE Futures Exchange back in 2004. Since then -- as the quote above says -- it has become "the fear barometer" for the markets.
Not surprisingly, the all-time record high in the VIX was 89.53, on October 24, 2008 -- in the middle of the financial collapse.
Volatility can be scary. When the DJIA was gaining and losing 500+ points a day in the fall of 2008, it didn't add any "certainty" to the markets.
Volatility can be frustrating. Imagine trading futures and going long the market when a 300-point decline comes out of the blue to trigger your stops -- and then you have to watch the market zoom 500 points higher (or 936 points, as the Dow did on October 13, 2008) in the direction of your original trade. Getting "shaken out" of a position like that can be terribly frustrating.
But let's face it: You can't make money in the markets when prices go sideways. You only talk about profits and losses when prices are trending. So for an experienced trader -- and also one with nerves of steel -- volatility can mean opportunity. (Just imagine the conversations volatility traders were having on October 10, 2008, when the DJIA registered its biggest ever intraday point swing: 1,018 points!)
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