As I write this the S&P 500 index is up 5.2%. At the same time, the VIX is down about 11.8%, close to half of the anticipated -4x move.
So to recap, the VIX rose more than twice as fast as one would expect and is falling almost half as fast it has over the course of its history. That, in a nutshell, is the fear in the market. Another way of looking at the stubbornly high VIX is that investors do not believe the current rally is likely to be sustained, so options sellers are not marking down options prices with any sense of urgency, estimating that continued high implied volatility will persist.
- Fearogram Maps Recent VIX Complacency
- The Week in Fear
- How Fearful Were We Last Week
- SPX-VIX Daily Correlation
- Performance Implications of VIX and SPX Divergences
- More Thoughts and Numbers on the SPX-VIX Correlation
- High Positive Correlation Between VIX and SPX Often Signals Market Weakness
Disclosure(s): short VIX at time of writing