Tag Archives | VIX Complacency banking vultures

VIX Graph February 26, 2010


There's not much to say about the data.  Market implied volatility is falling steadily – and once again VIX is below 20.

That level is not undeserved because realized market volatility is low and has been low.  Every sell off is met with buyers and the market moves slowly but steadily higher.

That's the market scenario that brings complacency, which in turn brings out more option sellers than buyers.  IV shrinkage can continue for quite awhile.  Just look at the left of the chart.  Three years ago VIX reached a level that was (barely) less than 10.

To me, the economic outlook is poor and middle-America is not going to do well.  However (as I read somewhere, but do not remember where), Congress seems to be on the path of continuing to protect the banks and Wall Street.  If that's true, then we may see something unusual continue: a society being slowly eaten alive by the banking vultures.  Translation:  more unemployment, more misery, more poverty and more profits on Wall St.

I'm perplexed, but outside of owning protection against a disaster, am unwilling to place any significant wager on the downside.


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