Despite the sell off that ammounted to wiping out all of yesterday's gains and a VIX that wiped out most of yesterday's losses (weekend adjusted), one thing stood out to me...the total lack of demand for VIX options. Through out the day I saw very few serious call buyers of VIX, in addtion I really didnt seem many put buyers in SPX. Adjusted for price, VIX really didn't do much today, maybe that is part of the reason things were so anemic. Stock volume was shallow yesterday, option volume shallow today. In fact, about the only trading I saw was upside call buying.
The one thing that has been stunning about this sell off has been the total lack of volatility as seen in the VIX. The VIX barely touched over 30 on Friday despite the middle of a 60 point sell off and a new low below levels from August. By the end of the day the VIX closed around 27. Today we saw the same thing, the SPX rocketed higher on the open and VIX got killed. Then by days end the entire rally was gone, and in fact the SPX had been down as much at 15 at one point. But take a look at VIX with the market up 14 and the market flat...coming off a huge sell off.
The SPX has a super ugly day today, dropping below 1900 and nearly 50 points. The SPX is now with in points of threatening the august lows. Yet, the VIX bore little reaction to today's market sell off. A day where the SPX is down more than 2.5% and the NDX was down almost 3% saw the VIX barely up 4 points. Yes, the VIX is already somewhat high at over 20%, but when we see a sell off like we saw today, and outright panic in the Biotechs, one has to wonder what is up. To put things in perspective, take a look at the lack or reaction in VIX (the red line) relative to August.