Next Volatility Wave About to Hit?
VIX at levels not seen since August.
Even as the S&P 500 breaks up to new 7-week highs, the VIX stubbornly remains above 40.
The VIX is down again today, losing 2.4%, but is still at 41.27. The SPX is up 2.8% to 833.80, putting us just above the highs of one week ago. The two indexes traditionally trade in inverse proportions.
The April VIX future is up at 42.25, with May at 42 and June at 41.20, both above the spot VIX value as well. The 20-day historical volatility for the SPX is above 46%, and traders appear unwilling to sell volatility much below that level, which is keeping the VIX from dropping more.
The historical volatility of the VIX is down to 86%, near its lows. The implied volatility of the VIX options is down to new lows since August, at 61%.
This is one of the lowest readings we've seen, and since volatility tends to come in waves, this makes me a bit nervous. It means that everyone believes the VIX won't move very much - and the last time we saw that was in late August.
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