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The $VIX, a key measure of market volatility, is facing challenges as the realized volatility of tech stocks is not accurately reflected in it. Goldman notes a multi-year high in the ratio between tech stock volatility and $VIX. Despite $VIX closing low at 12.45, concerns persist over its effectiveness due to vol selling strategies and short-dated options trading. $VVIX has hit decade lows around 70, indicating reduced $VIX call demand and limited expectations for further $VIX downside amidst $SPX rallies.
The $VIX closed at 12.45. Pretty much the lows since Dec 2023. Fear is extinct!
For the last seven months, we have witnessed a large buyer step in to buy $VIX calls and /VX whenever $VIX dipped into the mid-12s. This has immediately driven volatility slightly higher each time. However, if you have traded volatility for a while, you know these steep cave-ins…
$VVIX has continued to collapse to decade lows near 70. This is a sign that there is less $VIX call demand and that traders don’t expect much more $VIX downside if $SPX rallies. https://t.co/Nc4mBCuBtw