The Sub-10 VIX Is About to Set a Crazy Record

June 5, 2017
/ By Michael Comeau

Min Zeng of the Wall Street Journal just Tweeted a very interesting stat about the VIX:

$VIX at 9.75, on pace to close under 10 for the seventh time this year–the most
ever.

I double-checked the data and indeed, Zeng is correct.

But taking a deeper look at the data (my data set goes back to 1990), things get even more bizarre.

All 6 of 2017's sub-10 closes in the VIX happened on May 8 or later. (remember, today's would make lucky number 7)

And if get another sub-10 close, that would mark 5 in the past 7 sessions.

Since 1990, the VIX has NEVER closed below 10 in 5 out of 7 sessions.

So it's on the verge of a truly incredible record.

Already, the VIX has finished under 10 in 4 of the last 6 sessions. This has only happened 3 other times since 1990.

Those 3 other occurences were on 12/28, 12/29, and 12/30 in 1993, during a streak when the VIX had 4 straight closes below 10.

So the post-election collapse in volatility truly is remarkable.

Now let's take things a step further.

Prior to May 8, 2017, there were only 9 sub-10 closes in the VIX.

That's right.

Just 9 out of 6,891 trading days — or 0.13% of the time.

And now we're going on 5 in just 7 days — or 71%!

This looks insane, but let me explain why it's perfectly logical.

The VIX represents expected volatility.

And when actual market volatility goes to near-zero — as it has since President Trump's victory — the VIX follows.

Therefore, the VIX' behavior is entirely logical.

Anecdotally, I've been hearing a lot of traders chat up long positions in VIX-related instruments like VIX calls or VXX calls, or plain old SPY/SPX options.

I'll just leave you with one of the great all-time market one-liners:

“The market can stay irrational longer than you can stay solvent.”
-John Maynard Keynes

2017 has been BRUTAL to traders betting on a rebound in volatility.

You can know why it should happen, but you had better know when, or else you'll be eaten alive by time decay, one penny at a time.

So if you're going to put your chips down… be very careful.

The Sub-10 VIX Is About to Set a Crazy Record

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