Fear Is On The Decline

With the VIX (^VIX) currently at 77.13, it may seem like a strange time to talk about fear starting to leave the markets.

As I type this the VIX is down 2.00 and the SPX is down about 15. The fact that the VIX and SPX are both moving down this morning is unusual, but not unheard of. What makes the situation even more interesting is that it is happening on a Monday, when the VIX typically ’springs ahead’ to account for the ‘calendar reversion‘ effect in which the VIX is priced according to the calendar, but only calculated during trading days. The long and the short of this is that market makers tend to drop option prices on Fridays in anticipation of the coming weekend and raise them on Mondays.

We now have two Mondays in a row without any of the jaw-dropping end-of-the-world headlines many investors have come to fear. For that and other reasons, there markets seem to be less caffeinated this morning and the VIX is finally starting to feel the effects of gravity.

Posted in Categories: Contributor, External Research, Stocks.

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