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Traders Are Calm on Egypt

Wall Street Journal - Feb 12, 2011

The turmoil in Egypt may be grabbing headlines, but a policy of geopolitical worry hasn't paid off in the options market.

U.S. stock options so far have rewarded investors who shrugged off anxieties about oil-supply disruptions and aided those who ignored fears that stock indexes could be derailed by Middle Eastern unrest. Before and after Egyptian President Hosni Mubarak's resignation, the signal was one of confidence in a relatively smooth transition and little fallout for U.S. stocks.

"Volatility didn't explode over the last couple of weeks, at least for the U.S. equity market, and that was a proper prediction," said Alex Wohl, chief executive of Woodlawn Advisors. Looking forward, Mr. Wohl said traders appear focused on corporate earnings and continue to expect the Egypt crisis to remain under control.

The CBOE Volatility Index, or VIX, also called the "fear index," touched a four-week intraday low with word that Mr. Mubarak stepped down. It had plodded at relatively low levels all week. Closing 0.40 lower Friday, or 2.5%, at 15.69, the gauge of protective index options prices is below its historical average and took less than a week to erase a dramatic 24% surge triggered by Egypt worries on Jan. 28.

Read Full Article from Wall Street Journal

- Posted: 2011-02-12 21:05:37

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