Why vix so low

You might also be in for even more turmoil in the months to come. While there is a rotation in and out of various types of stocks going on, all sectors are still inching higher. Even the "losers" are still rising, but there's an element of "calm before the storm" right now. First-quarter earnings season is behind us , so it'll be a few months before another big batch of corporate financial reports is released. Investor focus has turned toward economic indicators and Fed commentaries, which could be either underwhelming or transformational as they are published.

Without as much company-specific news to move the needle, we're in a bit of a holding pattern until there's more certainty about when the Fed will adjust its interest rate and economic stimulus policies. Many people think that the Fed will start winding down its stimulus activities this year. However, others still expect the central bank will stick to its previously stated plan to hold the fed funds rate at its current level for a few years, even if that results in some inflation.

I tend to think that an earlier shift in policy is more likely, given the economic data and the likelihood that the timeline the Fed proposed last year was designed to instill confidence and prevent panic.

As soon as it becomes clear that the Fed will raise interest rates , volatility will probably spike. Capital will start flooding toward cash and bonds, and away from stocks -- especially from high valuation growth stocks. Nobody can know for sure when that will happen, and we won't be able to confirm it until the Fed states clearly that they are tapering.

However, any news along the way that shows higher-than-expected employment or inflation will get people anxious about monetary tightening. That's why we're in this odd wait-and-see scenario.

Volatility isn't necessarily a bad thing -- it's a natural part of how capital markets function. Market Watch. ET NOW. Brand Solutions. Video series featuring innovators.

ET Financial Inclusion Summit. Malaria Mukt Bharat. Wealth Wise Series How they can help in wealth creation. Honouring Exemplary Boards. Deep Dive Into Cryptocurrency. ET Markets Conclave — Cryptocurrency. Reshape Tomorrow Tomorrow is different. Let's reshape it today. Corning Gorilla Glass TougherTogether. ET India Inc. ET Engage. ET Secure IT.

Cryptocurrency By. Support and resistance areas have formed over time, even in the trending market of Perhaps the most important tidbit to glean from Figure 1 is the elastic property of implied volatility. A quick analysis of the chart shows that the VIX bounces between a range of approximately the majority of the time but has outliers as low as 10 and as high as Generally speaking, the VIX eventually reverts to the mean.

Understanding this trait is helpful—just as the VIX's contrary nature can help options investors make better decisions. Even after the extreme bearishness of , the VIX moved back within its normal range. If we look at the aforementioned VIX mantra, in context to option investing, we can see what options strategies are best suited for this understanding.

This means the market will likely turn bullish and implied volatility will likely move back toward the mean. The optimal option strategy is to be delta positive and vega negative; i. Delta positive simply means that as stock prices rise so too does the option price, while negative vega translates into a position that benefits from falling implied volatility.

When implied volatility is expected to rise, an optimal bearish options strategy is to be delta negative and vega positive i. This is common when institutions are worried about the market being overbought, while other investors, particularly the retail public, are in a buying or selling frenzy.

This "irrational exuberance" can have institutions hedging too early or at the wrong time. While institutions may be wrong, they aren't wrong for very long; therefore, a decoupling should be considered a warning that the market trend is setting up to reverse. The VIX is a contrarian indicator that not only helps investors look for tops, bottoms, and lulls in the trend but allows them to get an idea of large market players' sentiment.

This is not only helpful when preparing for trend changes but also when investors are determining which option hedging strategy is best for their portfolio. Cboe Exchange. State Street Global Advisors. Technical Analysis Basic Education. Advanced Options Trading Concepts. Finance Home. Currency in USD. Add to watchlist. Top Reactions. Reply Replies 2. This should be at 75 dollars already! Interesting that VIX is rising in a rising market the last 5 days.

Possible volatility coming?