Why is the VIX so very low? To understand this, one must understand exactly what the VIX represents. The VIX index is basically a measure of "S&P 500 stock index option prices" that is run by the Chicago Board Options Exchange. The VIX is not a tradable product and any exposure that investors desire to the VIX must be obtained in the futures market. The VIX index reading has, in the past, been a useful predictor for potential volatility in US equity markets and is susceptible to large swings to the upside if the S&P 500 experiences a significant decline and vice versa. Historic readings in the index has been useful for anticipating potential tops and bottoms in the equity market.
The world of the VIX is similar to Forex in many ways. Both are dominated by massive whales (institutional investors making huge bets as part of hedging strategies) and subject to very large swings from Black Swan events and the whims of the market.
The S&P 500 has been experiencing near-historic lows in volatility these past several months, with the index rarely moving outside of a daily +/- 1% window, which has caused the VIX to decline (as investors become complacent?) accordingly, hitting 8.84 on Wednesday. This is a very, very low reading to be sure, since the VIX typically stays around 12 during an average year.
With the emergence of ETNs that attempt to track the VIX, and leveraged ETNs that take leveraged bullish and bearish positions on VIX futures, VIX trading has become a popular pastime among some retail investors. Additionally, as the number of investment instruments with exposure to VIX futures expands, some analysts are questioning whether or not the VIX has lost some of its usefulness as a market indicator.
Commentary on the VIX and recent fund moves can be read at Barrons: https://www.barrons.com/articles/how-to-profit-with-vix-at-1993-levels-1501181025
The world of the VIX is similar to Forex in many ways. Both are dominated by massive whales (institutional investors making huge bets as part of hedging strategies) and subject to very large swings from Black Swan events and the whims of the market.
The S&P 500 has been experiencing near-historic lows in volatility these past several months, with the index rarely moving outside of a daily +/- 1% window, which has caused the VIX to decline (as investors become complacent?) accordingly, hitting 8.84 on Wednesday. This is a very, very low reading to be sure, since the VIX typically stays around 12 during an average year.
With the emergence of ETNs that attempt to track the VIX, and leveraged ETNs that take leveraged bullish and bearish positions on VIX futures, VIX trading has become a popular pastime among some retail investors. Additionally, as the number of investment instruments with exposure to VIX futures expands, some analysts are questioning whether or not the VIX has lost some of its usefulness as a market indicator.
Commentary on the VIX and recent fund moves can be read at Barrons: https://www.barrons.com/articles/how-to-profit-with-vix-at-1993-levels-1501181025
