Is VIX Pricing In The Fiscal Cliff?

Tyler Durden's picture

Much is being made of the drop in VIX today - with some suggesting it indicates confidence that investors believe the fiscal cliff resolution is closer. This could not be further from the truth. Investors had bought short-term VIX across the election and are unwinding that protection in the November futures contract but at the same, they are actively bidding for protection across the event-horizon of the fiscal cliff - out to Fedb 2013. The options market is absolutely not pricing in a fiscal cliff resolution and in fact is just beginning to price in the expected rise in realized volatility as the market becomes increasingly headline-sensitive once again.

The shift across the fiscal cliff barrier explains why short-term VIX looks more complacent as the medium-term VIX is bid...


As realized vol is on the rise so there remains plenty of room for implied vol to run higher...


Chart: Bloomberg

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
francis_sawyer's picture

 "with some suggesting it indicates confidence that investors believe the fiscal cliff resolution is closer"...


The Monday humor continues... unabated... undeterred...

jal's picture

Do nothing is the solution.

Fuh Querada's picture

...and do that aggressively.

tsx500's picture

VIX is a barbarous relic

walküre's picture

VIX is just another tool to scalping the players who still think they can outsmart the other guys.


TruthInSunshine's picture

VIX is clearly being manipulated by "evil speculators."

Cheesy Bastard's picture

Sigh.  Just another story about screwing muppets.

TruthInSunshine's picture

Bernanke is urging curbs on the VIX.

LawsofPhysics's picture

And here comes the gold supression.  Show me the physical.

PUD's picture

vix does not predix. there is no viable t/a. myth

buzzsaw99's picture

too bad charles ponzi didn't have the gubbermint and fed backing him

Metalredneck's picture

His face will be on the new $20.00 coin.

ziggy59's picture

Is the VIX historically accurate?

jcaz's picture

Yes it is- at pricing what happened 10 mins ago.....

SheepDog-One's picture

We'll definitely be good-to-go for another few $trillion in debt in no time, soon as they shake a couple million out of the 'rich millionaires' pockets!


vote_libertarian_party's picture

In early Sept 2008 it was in the teens.  4 weeks later it topped 100.


Only a handful of people saw the tsunami before it hit.

walküre's picture

Sure and this "tool" was hyped just in time to suck in more idiots who thought they were protecting their long positions from a further and steeper collapse.

I don't know when and I don't know how but eventually we're going to see INFLECTION POINT of RUNNING OUT OF SUCKERS vs. NEW SUCKERS BORN EVERY MINUTE.

Calling PEAK SUCKERS here first!

SemperFord's picture

lucky for us, our great leaders wil fix this on the last minute, like in the movies!

LawsofPhysics's picture

Please, there is no "market" for true price discovery anymore.  What garbage.  "Mark to fantasy" is stronger than ever.

Clowns on Acid's picture

Just Bernanke selling Puts again. If they finish way in the money....Bernanke doesn't care. Print, baby print.

slaughterer's picture

Too bad all of those OTM VXX  Feb 13 calls will expire worthless.

Alpha Dog Food's picture



My clothes fell off a cliff and makes more interesting reading than this (bitchez!) on :-)


falak pema's picture

food and women in the nude : now thats poetry  for u. 

mewenz's picture


previously, you've alluded to the Central Bank as a seller of volatility, several times.  Any way to provide more information on this?  If not, understand, but would be very interesting to know more.

Given the rather obvious lack of belief by the Fed in fair and free markets as the arbiter of price discovery, it would seem the most obvious places they would go to manipulate would be selling volatility (making insurance cheap for going long) and selling oil futures, as "that stuff goes in everything".

Further information on odd or otherwise behavior in either market would seem to be of great interest and value

Ibird's picture

It's important for the Fed to sell VIX calls:
1) it suppresses fear among the lemmings - stocks could never go lower if the VIX is not moving higher
2) selling uncovered calls is a money maker - Fed transfers more dollars the the Treasury

What could go wrong?

mewenz's picture

yeah....and no need to cover them if you can just print to make up the difference if need ever be or just hide them on an unaudited balance sheet or just etc...

I just find it a bit frustrating at times that such a large amount of attention, perhaps rightly so, is placed on odd movements within precious metals, large short positions by JPM etc., while beyond an occasional 1 liner out of Zero Hedge, not a peep seems to be of public discourse on the price of volatility.  Even further, all the talk of those "nasty speculators" in the energy markets driving prices "up", but purely fundamental reasons are simply accepted for the once ridiculous notion that WTI oil could consistently cost $20+ less then less worthwhile, from a pure fundamental standpoint, Brent.

q99x2's picture

Nice graph of VIX 

Bastiat009's picture

Is this "fiscal cliff" a problem or the solution?

In 2008, politicos and the media claimed that debt was the solution and not the problem. They claimed that a depression was a problem while we all know it would have been the solution. So now, why should I believe that the fiscal cliff is a problem?

OldPhart's picture

Hegelian dialectic

I'm sure the solution to be 'discovered' will have implications we can only imagine at this point.

JustObserving's picture

There is no way to resolve the Fiscal Cliff by taxes or spending cuts.  They will simply not be enough.

The Fiscal Cliff will be resolved by hyperinflation or default or by a major war.  My bet is on the war that erases all foreign debts of the US.

Beam Me Up Scotty's picture

Does debt even exist if everyone is dead?

MFLTucson's picture

Hope we go over the cliff, hope it shuts down all wellfare and hope the food stamp president is held accountable and removed from office for Bengazi.

francis_sawyer's picture

Been watching Fox News I see...

earnyermoney's picture

Barry held accountable by the media? LOL


Not going to happen. Barry ran a cynical populist campaing and the 99% bought it hook, line and sinker. Where is Jon Corzine?

crzyhun's picture

What? And get Uncel Joe????

jackinrichmond's picture

strange that the VXX (the inverse for VIX) is behaving oddly today too.  when the market dropped from +0.25 to -0.25 in an hour the VXX MOVED DOWN to -4.5%.  when the market jumped back up about three quarters of a point, the VXX continued moving down.  this is contrary to it's usual action.   how can VIX and VXX move agressively in the same direction?

SheepDog-One's picture

YAY fiscal cliff FIXED we're front-runnin and pricin' it in! $600 trillion found...gonna get it by taxes! OMFG buy stawks!!

jackinrichmond's picture

..and who's buying all the bonds today ?

Quinvarius's picture

Does anyone actually believe Obama is stupid enough to raise taxes and that this isn't just his bargining piece to get more spending?  This is exactly what he did last time.  He ended up trading meaningless future cuts, that will never happen, for more spending.

They are going to raise the debt limit.  Spending will increase.  Taxes might go up a very tiny bit in a meaningless way.  If anything else happened, the system would implode.  It is as sure a thing as QE3 was to save the banks, and the coming QE4.  There is not really a choice for them to make.  They just have to keep it going same as before.

sablya's picture

Not that it matters but Moodys threatened a downgrade if the best Congress can come up with is to raise the debt ceiling.

crzyhun's picture

Mere vol surpression courtesy of the NYFed.

virgilcaine's picture

S&P Reversal to the downside coming...!  <intraday> Though currently Short the Nas doggie.. woof woof.

virgilcaine's picture

Jr bots are in today so could be good!   Watch this level here..ready to go! Trading the Jr bots lite though via Emini nas.."the puppies".

All_Is_Well's picture

What would the VIX be with 60 mil. people on food stamps?