Perhaps, but this is a chicken vs. egg situation. Which came first : The drop in the index or the run-up of gamma ? Also, the put sellers needed only to cover their positions instead of selling the index. Alternatively they could have sold call options.
Which is how I view the VIX. A lagging indicator while the crowd seem to be calling it a leading indicator. I totally ignore VIX, never bother with it these days (last few years).
It's a great measure of market fear or complacency.....there are futures on it: https://cfe.cboe.com/cfe-products/vx-cboe-volatility-index-vix-futures and even options on the VIX: https://finance.yahoo.com/quote/VIXY/options/ making them super-derivatives....derivatives of a derivative.
VX futures are a hell of a thing. I've done a bit of research them, and now know that in this low vol environment, you simply cannot roll them long hoping for a spike, because the contango is so bloody high. No wonder people keep shorting the thing. Jan VX will prolly' come down to 12ish before the next roll, just as Dec VX came down to 12ish on it's roll, when it was at 15ish. I'll be cancelling my VX data feed at end of the month...It is not something I can trade. If I were master of the roll I would keep it. But it is not for me. Not with an $8,800 overnight margin requirement per contract (last I checked).
imo, VIX is too late as an indicator, everyone watches it, imo, it's a dumb money indicator, once it may have had merit, no longer. If the masses are referrng to it these days, then its like the top heavy boat, the crowd have rushed to the side which is going down.
The VIX is insurance, not a trading instrument. The contango cost needs to be thought of as an insurance premium. If you are holding substantial longs on long term views, hedging with the VIX (and paying the rollover cost) is worth the trouble because the VIX moves 6 X the S&P in a crash... a pinch of VIX gives a wheelbarrow of protection. If you want to trade the VIX you do it by shorting it... in fact, short the VIX & hold forever gives you about 6% to 8% return on capital, beats a fixed deposit in the bank, just be smart enough to sell on a spike.
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