VIX traders aren't resting easy about market volatility, pricing in a hot May 2012 reading of over 30 on the market's fear gauge - markedly above historical standards. MarketWatch's JC Parets says even bulls should be on board with VIX trading - using options as a hedge against too much stock market exposure.
A record 36.1M option contracts changed hands yesterday, breaking the previous mark by 17% dating back to the dramatic Flash Crash of May 6, 2010. Options on the VIX alone tallied $3.7B, according to data from the CBOE.
The market's fear gauge is starting to oscillate with bigger swings on more economic uncertainty after sitting passive for the last few months. The CBOE Volatility Index (VIX) shot past 25 early before settling back, and is the 3rd most-traded option contract for the day.
With the VIX recently dropping to a three-year low of 15.45, Bill Luby warns investors not to get too excited about the recent lack of volatility - at least not for this time of year. Case in point: In five of the last eight years, the annual low fell during the week before Christmas.
The VIX fell below 16, a level unseen since just before the spring correction, and MarketBeat wonders if it means complacency has set in. "Most of the market chatter we hear seems to indicate that the only direction stocks can go is higher. That alone would make us somewhat nervous. Seeing the VIX fall to these levels is another eyebrow raiser."