it should be 20-25 at least. They do not seem to be pricing in the Fiscal cliff in yet. IS there a reason for such a low VIX compared to the news?
Yes, most people obviously think this will be just a minor dip, like the ones we have seen before. Actually, this type of complacency could foreshadow a major drop.
Yes, December November usually low vix (seasonal) Also QE3 was announced. This is just capitulation, or angry Republicans trying to crash the market.
It is currently 18.61 and on the way to rise, the chart tells more than 1000 words or so: http://finance.yahoo.com/q/ta?s=^VIX&t=2y&l=on&z=l&q=l&p=b&a=m26-12-9,w14,r14,ss&c= I expect it to rise at least to 22.0 till end of year. That's 17% rise!
S&P is only 100pts off its 52 week high. The start of any Bear market would be a 300 pt drop, so still a long ways to go before we even get started.
Since the vix is a mathematical interpolation of implied volatility in SPX options 30 days out, it simply reflects the current supply/demand characteristics of those options, and that is based on the actual volatility of the underlying. Since the actual (also referred to as historical or realized) volatility of the SPX is well below 18 there is no reason to have the vix any higher. Only panic put buyers or a noticeable increase in realized volatile will send it a lot higher. In other words, a more appropriate question would be why is the vix so high since the realized volatility of the underlying is noticeably lower. The answer is because worried put buyers are taking action in fear of the fiscal cliff (or any of the other worries out there), so the vix is a little higher than it should be based on the mathematics of options. If you can predict either implied volatility in options, or realized volatility of an underlying, with consistency you can make more money than you will ever need.
The above statement you wrote on sunday, and somehow you are right: today (Mo) it fell 10.37% http://finance.yahoo.com/q/bc?s=^VIX&t=6m&l=on&z=l&q=l&c= But what does a so low VIX mean for the market? Market activity declining? What is to expect at the bottom?