This page has been archived and commenting is disabled.

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

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 11/12/2012 - 13:37 | Link to Comment francis_sawyer
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...

Mon, 11/12/2012 - 13:40 | Link to Comment jal
jal's picture

Do nothing is the solution.

Mon, 11/12/2012 - 14:11 | Link to Comment Fuh Querada
Fuh Querada's picture

...and do that aggressively.

Mon, 11/12/2012 - 15:22 | Link to Comment tsx500
tsx500's picture

VIX is a barbarous relic

Mon, 11/12/2012 - 15:38 | Link to Comment walküre
walküre's picture

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

STOP PLAYING

Mon, 11/12/2012 - 13:36 | Link to Comment TruthInSunshine
TruthInSunshine's picture

VIX is clearly being manipulated by "evil speculators."

Mon, 11/12/2012 - 13:40 | Link to Comment Cheesy Bastard
Cheesy Bastard's picture

Sigh.  Just another story about screwing muppets.

Mon, 11/12/2012 - 13:41 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Bernanke is urging curbs on the VIX.

Mon, 11/12/2012 - 13:59 | Link to Comment LawsofPhysics
LawsofPhysics's picture

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

Mon, 11/12/2012 - 14:05 | Link to Comment francis_sawyer
francis_sawyer's picture

put your scuba gear on...

Mon, 11/12/2012 - 13:37 | Link to Comment PUD
PUD's picture

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

Mon, 11/12/2012 - 13:38 | Link to Comment buzzsaw99
buzzsaw99's picture

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

Mon, 11/12/2012 - 15:27 | Link to Comment Metalredneck
Metalredneck's picture

His face will be on the new $20.00 coin.

Mon, 11/12/2012 - 13:41 | Link to Comment ziggy59
ziggy59's picture

Is the VIX historically accurate?

Mon, 11/12/2012 - 13:43 | Link to Comment jcaz
jcaz's picture

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

Mon, 11/12/2012 - 14:31 | Link to Comment SheepDog-One
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!

 

Mon, 11/12/2012 - 15:06 | Link to Comment vote_libertaria...
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.

Mon, 11/12/2012 - 15:41 | Link to Comment walküre
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!

Mon, 11/12/2012 - 13:42 | Link to Comment SemperFord
SemperFord's picture

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

Mon, 11/12/2012 - 13:41 | Link to Comment LawsofPhysics
LawsofPhysics's picture

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

Mon, 11/12/2012 - 13:42 | Link to Comment Clowns on Acid
Clowns on Acid's picture

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

Mon, 11/12/2012 - 13:42 | Link to Comment slaughterer
slaughterer's picture

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

Mon, 11/12/2012 - 13:45 | Link to Comment Alpha Dog Food
Alpha Dog Food's picture

 

 

My clothes fell off a cliff and makes more interesting reading than this (bitchez!) on http://alpha-dog-food.com :-)

 

Mon, 11/12/2012 - 13:52 | Link to Comment falak pema
falak pema's picture

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

Mon, 11/12/2012 - 13:48 | Link to Comment mewenz
mewenz's picture

Tyler,

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

Mon, 11/12/2012 - 13:52 | Link to Comment Ibird
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?

Mon, 11/12/2012 - 14:18 | Link to Comment mewenz
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.

Mon, 11/12/2012 - 13:53 | Link to Comment q99x2
q99x2's picture

Nice graph of VIX 

Mon, 11/12/2012 - 13:57 | Link to Comment Bastiat009
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?

Mon, 11/12/2012 - 14:14 | Link to Comment OldPhart
OldPhart's picture

Hegelian dialectic

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

Mon, 11/12/2012 - 14:00 | Link to Comment JustObserving
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.

Mon, 11/12/2012 - 20:01 | Link to Comment Beam Me Up Scotty
Beam Me Up Scotty's picture

Does debt even exist if everyone is dead?

Mon, 11/12/2012 - 14:00 | Link to Comment JPM Hater001
JPM Hater001's picture

Green!

#Winning

Mon, 11/12/2012 - 14:01 | Link to Comment MFLTucson
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.

Mon, 11/12/2012 - 14:06 | Link to Comment francis_sawyer
francis_sawyer's picture

Been watching Fox News I see...

Mon, 11/12/2012 - 14:15 | Link to Comment earnyermoney
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?

Mon, 11/12/2012 - 14:17 | Link to Comment crzyhun
crzyhun's picture

What? And get Uncel Joe????

Mon, 11/12/2012 - 14:03 | Link to Comment jackinrichmond
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?

Mon, 11/12/2012 - 14:05 | Link to Comment SheepDog-One
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!!

Mon, 11/12/2012 - 14:11 | Link to Comment jackinrichmond
jackinrichmond's picture

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

Mon, 11/12/2012 - 14:12 | Link to Comment scrappy
Mon, 11/12/2012 - 14:18 | Link to Comment Quinvarius
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.

Mon, 11/12/2012 - 14:36 | Link to Comment earnyermoney
earnyermoney's picture

Yes.

 

Mon, 11/12/2012 - 21:48 | Link to Comment sablya
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.

Mon, 11/12/2012 - 14:16 | Link to Comment crzyhun
crzyhun's picture

Mere vol surpression courtesy of the NYFed.

Mon, 11/12/2012 - 14:18 | Link to Comment The Axe
The Axe's picture

coiled spring

Mon, 11/12/2012 - 14:34 | Link to Comment virgilcaine
virgilcaine's picture

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

Mon, 11/12/2012 - 15:04 | Link to Comment virgilcaine
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".

Mon, 11/12/2012 - 15:22 | Link to Comment All_Is_Well
All_Is_Well's picture

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

Mon, 11/12/2012 - 18:23 | Link to Comment kalasend
kalasend's picture

15

The more foodstamp collectors, the lower VIX goes.

Mon, 11/12/2012 - 15:25 | Link to Comment orangedrinkandchips
orangedrinkandchips's picture

RISK HAS LEFT THE BUILDING!!!

 

vix is a broken indickator

Mon, 11/12/2012 - 17:09 | Link to Comment virgilcaine
virgilcaine's picture

When one starts making animal sounds... well it's a long trading day.  A Nice intra day range though.

Mon, 11/12/2012 - 21:06 | Link to Comment DowTheorist
DowTheorist's picture

There is another cliff on the horizon: The stock market cliff.

 

The stock market is right now on thin ice. According to Dow Theory is the Transports violate their 09/28/2012 secondary reaction lows, a new bear market would be signaled. Not a good omen.

 

Here you have the relevant chart,  what to look at and comments thereto:

 

http://www.dowtheoryinvestment.com/2012/11/dow-theory-special-issue-is-p...

 

Tue, 11/13/2012 - 03:58 | Link to Comment supra
supra's picture

when you are done several several potential customers developed the cheap kobe 8 shoes,cheap kobe 8 shoes
The item needed a suitable kobe 8 determined in the same place,likely that has a further starter go-blocking
these items are sure to satisfy even the pickiest of teenagers hyperdunk low,hyperdunk low
The station and the carriages had tables with individuals 2012 hyperdunks sitting at them reading the paper and drinking tea or coffee
the serial compare among different sacks mi replica watches and producers kobe 7 elite laid precise care and meticulous dedication on each and every detail, ensuring its ideal condition.
A replica louis vuitton prada handbags shop in Florence, Italia. Born right into a family with past leather making Lebron 9 Elite would be a gifted leather builder by having an eye for replica watches uk be of the hue which could be effortless abreast to the eyes.
which could scratch and damage genuine adidas 2012,adidas 2012
Please be attention ! Not set the time or date when the hour hand show at cheap adidas 2012 shoes has huge diameter 50 mm . The design of this series
Constantly break through self-innovation The cheap hyperdunk 2013 n recent years there have been major movement, launched outdoor
products continue to be everyone's favorite, has opened up a new world in the face of hyperdunk 2013 utdoor professional recycled polyester and waterproof fabric Gore-Tex
manufacturing winter clothing models, and also take a lot of bright and fluorescent color configuration hyperdunks 2012 blends sports and leisure, dress up both and comfortable.kobe 8 and every day just using a mild soap and running water to get rip off any lotions, Oils etc.
Don’t use a brush even very soft for everyday cleaning since supras shoes can shorten the usage life of a strap
A lot of website now have comment for every product they sell lebrons shoes cartier watches are on sale . If got interst . Please contact us freely How much you know about the Watch Movement Core ?
lebron 9 low are very popular now in the whole watch market at affordable price .
All of them were people who had cut themselves off from ordinary life hyperdunks 2012 , but they seemed to have created a life of their own, independent of any master,When there was no work,

Do NOT follow this link or you will be banned from the site!