Published January 17, 2013
Last year was one of the calmest years in terms of stock market gyrations and this year, thus far, is turning out to be the same.
Stock market volatility in 2013 has continued its downward trend toward levels experienced just before the onset of the 2008 financial crisis.
The CBOE S&P500 Volatility Index (^VIX) has been trading in the 13's, right near its 52-week low.
A depressed VIX can be interpreted as too much complacency or lack of fear in the market. It's frequently used as contrarian sell signal. Conversely, an elevated VIX infers a high level of fear and could be a good buy setup, depending on the circumstances.
Exchange-traded products (ETPs) that go long the VIX like the ProShares VIX Short-Term Futures ETF (VIXY)continue to make new lows. The iPath S&P VIX ST Futures ETN (VXX) is down -98.5% since its inception in 2009. The selling pressure in long VIX ETPs will continue until stock market volatility pops.
As for VIX February and March call/put options, Russell Rhoads, CFA with the Options Institute at the CBOE observed the following:
"Typically at this point the trading focus would be on February options, however, this time it is different. Traders seem to be looking past February to March options. The next drama to come out of Washington, DC is going to be the debate over the debt ceiling which will probably come to a head after February expiration, but before March. Because of this March call options have been active."
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