The recent drop in volatility / VIX.

savoir said:
Your post suggests you aren’t aware that volatility is cyclical. That’s hard to believe.

Most years are a grind. Infrequently there is a crisis that presents opportunities for easy outsized profits. These periods are relatively brief in a historical context and appear as spikes on the volatility index.

Trading 101.
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Curious. What in my post suggests that I don’t understand that volatility is cyclical?

I’m well aware that we have had heightened volatility over the last two or three years and have had longer periods of way lower volatility than we saw so far this week.

My post ended with a question in case you missed it.
 
The lower VIX volatility for this time of year may be typical.

upload_2023-5-11_11-22-27.png
 
Laissez Faire said:
Curious. What in my post suggests that I don’t understand that volatility is cyclical?

I’m well aware that we have had heightened volatility over the last two or three years and have had longer periods of way lower volatility than we saw so far this week.

My post ended with a question in case you missed it.
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If you know volatility is cyclical, which I’m sure you do, then don’t you already know the answer to your question? Maybe something is getting lost in the translation.
 
savoir said:
If you know volatility is cyclical, which I’m sure you do, then don’t you already know the answer to your question? Maybe something is getting lost in the translation.
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No, I don’t know if this is only a brief drop in volatility or if we will enter a sustained low volatility period over a longer period with the occasional spike. The latter would surprise me during these times, but I don’t know.

That’s why I’m opening up this thread for discussion.

What I do know is that we’ve seen days this week we haven’t seen in a long while.

Maybe the summer months will actually be quiet this year like they typically are historically. As posted by @comagnum. Summer doldrum.
 
Laissez Faire said:
No, I don’t know if this is only a brief drop in volatility or if we will enter a sustained low volatility period over a longer period with the occasional spike. The latter would surprise me during these times, but I don’t know.

That’s why I’m opening up this thread for discussion.

What I do know is that we’ve seen days this week we haven’t seen in a long while.

Maybe the summer months will actually be quiet this year like they typically are historically. As posted by @comagnum. Summer doldrum.
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What are “these times” and why would it surprise you? I’m old, so not many things surprise me.
 
Laissez Faire said:
Is this just a temporary pause before volatility picks up again?
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I vote it's a temporary pause lest the short vol trade once again get crowded and a new generation of naive traders are blown to kingdom come thinking short vol is the Holy Grail can't lose perfect trade. The question remains, how long before the inevitable? No way to predict this other than to point at the fierce macro headwinds on the horizon and say "soon".
 
I will vote “permanent” to facilitate a market for the thread topic.

I’m being facetious but the fantastic market conditions of 2020-2022 are over. It’s back to the grind.
 
Laissez Faire said:
So, last week the VIX dropped to the lowest level since November 2021.

The e-mini S&P 500 had a 14.25 point range in regular trading hours this Tuesday - the smallest since August 2021. Average range in regular trading hours so far in 2023 is 52.5 points.

With the exception of yesterday's roller coaster the market definitely is taking on a new characteristic here that we haven't seen in a long while.

Any thoughts?

Is this just a temporary pause before volatility picks up again?
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It is the day traders' nightmare.


On 5 May 2023 Fri, the market moved massively (long blue candle).
Subsequently, the market had to rest on 8 and 9 May 2023, Mon and Tue

Such a pattern is quite common actually.
 
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