• So Is There Fear Out There?

    by  • March 14, 2014 3:13 pm • Breaking News, Broad Market Analysis

    I’ve seen a few comments today about how complacent things seem.  As Lee Corso might say, “Not so fast my friends.”

    For starters, check out VIX call volume today.  Up to 1.34 million shares currently.  A good chance this could be the second highest day since May.  Interesting to note that the highest was 1.88 million back on 2/3/14 when the SPX dropped >2%.  We aren’t seeing much of a drop today.

    Next up is something we call the VIX premium.  It compares spot VIX versus the 20-day historical volatility on the SPX.  When this spikes it is option traders way of saying they are expecting some near-term volatility.  Usually this tends to happen after times of weakness and can market bottoms.

    As you can see below, recently the premium was up to more than 120%!  This is the highest reading since early ‘13.  Maybe the average investor isn’t acting worried, but I sure think option traders are bracing for some fireworks next week.

     

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