Seeking Alpha

The CBOE Volatility Index today dropped below 12 for the first time since 2007 and against a...

The CBOE Volatility Index today dropped below 12 for the first time since 2007 and against a long-term average of 20.4. Contrary to what contrarians believe, writes Mark Hulbert, low VIX levels are not necessarily bearish. Thinking about VIX as what it is - a measure of expected volatility - rather than as a "fear gauge" might help do away with this misperception. VXX -2.2%.
Comments (18)
  • EARLPEARL
    , contributor
    Comments (254) | Send Message
     
    all the worlds problems have been solved by the central banks...no fear anywhere..borrow all the money you can and buy stocks...nothing can go wrong...
    11 Mar 2013, 01:01 PM Reply Like
  • JP Professional
    , contributor
    Comments (56) | Send Message
     
    Earl, it appears as though this global collaboration by central banks may in fact be a cure all for our economic woes. If all central bankers are debasing there really becomes no safe haven so you don't get a "run on the bank". When all the dogs have fleas, there really is nothing to do but scratch the itch. For now, it appears being long stocks is the only way to keep up with the inflation caused by the global inflation of assets.
    11 Mar 2013, 01:22 PM Reply Like
  • TakeFive
    , contributor
    Comments (5108) | Send Message
     
    I knew that.
    11 Mar 2013, 01:48 PM Reply Like
  • glssmrbl
    , contributor
    Comments (288) | Send Message
     
    not a good fix but definitely an inevitable one.
    11 Mar 2013, 02:05 PM Reply Like
  • Neil459
    , contributor
    Comments (2644) | Send Message
     
    . . . . that is nothing can go wrong if you are a central banker.
    11 Mar 2013, 01:19 PM Reply Like
  • JP Professional
    , contributor
    Comments (56) | Send Message
     
    It (VIX) can stay deflated for a long, long time. Periods of extreme volatility are rare, but because they usually coincide with major economic events (market panics, crashes and collapses) we tend to remember those time periods vividly.
    11 Mar 2013, 01:19 PM Reply Like
  • bbro
    , contributor
    Comments (9167) | Send Message
     
    2/26/07....
    11 Mar 2013, 01:26 PM Reply Like
  • rfernando80
    , contributor
    Comments (37) | Send Message
     
    This market is rallying on ridiculously low breadth and volume, big defensives stocks are leading and cyclicals are taking a beat, and that's all after massive insider selling. Bullishness and complacency everywhere you look. Markets can stay irrational for a while, but eventually, we all know what happens.
    11 Mar 2013, 01:32 PM Reply Like
  • glssmrbl
    , contributor
    Comments (288) | Send Message
     
    It frustrates me that it isn't happening yet. As the Joker says, no one panics when everything goes according to plan, but we lose our minds when an unexpected event happens.
    11 Mar 2013, 02:07 PM Reply Like
  • Third Eye Market Analyst
    , contributor
    Comments (119) | Send Message
     
    Market may seem irrational if looked through the paradigms of black swans, complexity theory, and profiteering from disorder and chaos...but I believe that the close economic and government cooperation and coordination on a global scale calls for a different kind of thinking...Is it irrational to invest money into productive assets that actually create value? Isn't that what healthy markets are all about? and not the dysfunctional, destructive financial markets that we've seen over the past 15 years?
    11 Mar 2013, 02:10 PM Reply Like
  • Rummeljordan
    , contributor
    Comments (477) | Send Message
     
    The VIX is low. That means that it is impossible for anything to go wrong in the market.....Thank Uncle Ben!
    11 Mar 2013, 02:25 PM Reply Like
  • Remyngton
    , contributor
    Comments (354) | Send Message
     
    .

     

    " it's different this time ..... "

     

    famous last words

     

    .
    11 Mar 2013, 03:21 PM Reply Like
  • 299693
    , contributor
    Comment (1) | Send Message
     
    The Fed seems to be applying its own version of trickle down effect. Seems to me they are inadvertently causing an economic polarization to the extent never seen in this country. Hope they don"t start a revolution. Just saying.
    11 Mar 2013, 04:20 PM Reply Like
  • MWingo
    , contributor
    Comment (1) | Send Message
     
    I've got big money saying this VIX pops in the next two months. All I need is it to go above 15 for nice profit, anyone else playing this index right now
    11 Mar 2013, 04:21 PM Reply Like
  • aschaff
    , contributor
    Comments (25) | Send Message
     
    I am considering a small position in VIX future ETN (VXX or VXZ, perhaps). But, I have taken a hit on it before, so I'm gunshy. It would be different if I could actually buy the VIX. I don't see much downside.
    12 Mar 2013, 07:12 AM Reply Like
  • Third Eye Market Analyst
    , contributor
    Comments (119) | Send Message
     
    MWingo, how are you playing a pop in VIX to 15? VIX futures? VIX options? VXX options? SPY straddle? Most VIX plays are priced off of VIX futures, not the spot VIX. Let's take a look at VIX futures prices...

     

    If VIX pops to 15 in a matter of 1 week, then being long the March VIX futures at 13 would give you a nice return. VIX Mar future expires on the 20th. If VIX goes to 15 within 1 month time, VIX April futures trading at 14.50 would have upside potential to 16.50, but down side is 11.5. Finally, if VIX rises to 15 within 2 month time, VIX May futures trading at 15.5, the upside would be limited to 18, while the downside is 11.5. Of course, VIX could go higher than 15, but I have to ask if you are fully aware as to how prices of volatility instruments actually move...
    12 Mar 2013, 08:27 AM Reply Like
  • TakeFive
    , contributor
    Comments (5108) | Send Message
     
    aschaff.... I did extremely will in the summer of 2011 with VXX but a case of being lucky with timing. I'm following it and would consider it for a short term trade. If I drop a little I write it off as cost of insurance but I've also learned it's not a good hold..... unless the timing is great.
    12 Mar 2013, 02:51 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (7838) | Send Message
     
    There is very deep value in the VIX at the moment. You've just gotta know how to play it while you wait for the inevitable upside.
    12 Mar 2013, 08:43 AM Reply Like
DJIA (DIA) S&P 500 (SPY)