Quote from vulture:
Its probably just a question of semantics. On a relative basis, yeah this is very low considering the fundamental risks in this market, especially in light of the bond markets collapse. But, again, this is part of the seasonal cycle as the stats I posted above indicate. Volatility is compressed until "they" begin to start hedging in a signiciant way to either lock in gains on their performance from the first 3/4's of the year or an exogenous event hits at this seasonally fragile time of year. Right now, the low volume is sort of distorting the tape, so I would look for something significant between August 25th-30th.
There may well be a seasonal tendency for VIX to rise/fall at certain times of the year. Kind of like there is a seasonal tendency for August to be a weak month....etc etc.
I find it interesting though to contemplate the last time we made a big move down in VIX. That was following the last Gulf War. Turns out we dropped under 10 on VIX in 1993. If memory serves I believe 20 became a "ceiling" in VIX then for the next several years...perhaps until 1996-1997.
The exact numbers by day are available at
www.cboe.com....all the way back to the beginning of VIX, not just the last few years.
If you think back to the last few years, is it within your imagination to think that IF we don't have another 9/11, anthrax attacks, another mideast war, that perhaps the "range" of VIX will rachet itself lower. In other words, instead of 20 being low, perhaps another number will be low.....let's just say 15. Perhaps 25-30 will be high instead of 40 or 50.
I throw this out there because the world changes....and yet we as traders sometimes fixate on what has happened in the most recent few years, and then extrapolate that into the future. A big mistake. Why there is no holy grail....because there is always something a little different.
VIX in my opinion is not a fear/complacency indicator as some technicians would have you believe. It is simply the markets perception of volatility. It is true that the VIX tends to be "low" at market peaks, and "high" at market bottoms. But those are relative terms. As I mentioned above, there was a period of several years where the "high" on VIX was around 20.
OldTrader
