Stock-market volatility surges, but VIX traders arent panicking yet
With the U.S. stock market headed for its worst three-day slide in years, it is obvious that volatility is back. Volatility measures, however, are sending mixed messages.
The Cboe Volatility Index, or VIX VIX, +77.41% which measures implied volatility on the S&P 500, has more than doubled from the record low set late last year, but VIX futures contracts suggests the spike in volatility will abate over the next few months.
On Monday, the VIX, which gauges investor expectations for volatility over the coming 30 days, surged 26% to 21, above its long-term average of 19.5. The VIX is up 97% since the start of the year.
However, VIX futures are still pricing in more subdued volatility in the near future.
VIX futures expiring in February are currently priced at 17.80, while March, April and May contracts all indicating a price near 16.
“Whenever we have a sudden spike in VIX, we almost always have this situation. What this means is that futures traders believe VIX will come down over the next month,” said Randy Frederick, managing director of trading and derivatives at Schwab Center for Financial Research.
https://www.marketwatch.com/story/volatility-futures-traders-arent-panicking-yet-2018-02-05?siteid=rss&rss=1
