It was a barn burner of a day today with stocks notching a barely green close. The reality is that vol is dead right now. We have a potentially market shaking rate rise and VIX cash is 11.35. Dutch elections and French elections are coming and the vol markets are shrugging their shoulders. I did not think VIX Apr futures would close below 14 before Mar expiration but that is where we find ourselves today.
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One of the odd artifacts of the last few weeks is that no matter how sensational the press from DC gets VIX cannot hold a bid. While the Washington rancor permeates the social media atmosphere stocks drift from a cautious euphoria to benign neglect. Today was a bit of the latter but the demand for premium in specific areas still exists.
After the record setting day yesterday it is likely that we had a pullback today. There was no real economic news to make stocks selloff just a lack of good news. The only problem with yesterday’s rally was that it was too steep. VIX really could not move down because traders could not keep ATM vol that low so the VIX drop was small on Wednesday.
As the SPX tilts to all-time highs again, VIX is meandering down to the 11 handle after getting oversold last week into the holiday. What was strange was the action in the VIX future term structure. VIX futures lifted on a day when there was scant market activity and close to close volatility was even lower than the posted 10 day 4.28%. Every future in the VIX term structure was higher.