I did not record the timestamp on that snapshot but I believe it was 15 minutes or so before the close.
As of 3:03 PM the S&P rallied back towards even as did the VIX. Curious behavior to say the least.
What’s Going On?
I don’t know, but here are some theories.
- Hedge funds and pension funds doubling up on short volatility trade.
- Manipulation against Mr. 50-Cent VIX.
- Pure complacency. No one wants PUTs.
Points 1 and 3 are more likely.
Short Volatility Trades
I wrote about short volatility trades twice recently.
November 7: Expect a Volatile Future: Short-Volatility Funds Flooded With Cash
December 6: “Everyone in the Room is Selling Volatility”
“Volatility was once just a measure. Now it’s an income-generating product. Everyone is selling it says Pennant Capital.”
These short-volatility pension fund managers will get blown out of the water one day.
Mike “Mish” Shedlock
Volatility as a measure of risk is meaningful in a speculative market. This not a speculative market. This market is about money flows, global capital seeking investment strategies. If you are fully hedged for instance you have no risk. If you are selling stocks and buying bonds to reallocate there is no protean change to the risk environment. It may be that the rational market sees more risk in buying stocks than in selling. Economic indicators are picking up GDPnow predicts 5%?? Does that sound like risk to earnings? The Fangs all reported record revenue, again risk? Does contraction of the global monetary base represent risk? Less money competing for a fixed number of assets (where is M&A and new issuance?) A rogue asteroid is headed toward Earth? Good news is its made of gold, we’ll all be rich.
if you don’t like his ideas, opinions, you don’t have to visit this web page.
We are here to read Mish and his insights, opinions, not yours, who the hell are you to tell him what to write ?
The VIX was down when the stock market was down. It rose when stocks rallied. Can you read?
You shouldn’t write at all about volatility, ever.
Holy crap. Two straight days of unchanged, heading into a weekend, and you are asking why VIX is down????