• Knave Dave
    05/23/2016 - 18:16
    This past Thursday marked the one-year anniversary of the US stock market’s death when stocks saw their last high. Market bulls have spent a year looking like the walking dead. They’ve...

Are We In A New VIX Regime?

Tyler Durden's picture


It would appear that the sell-side is in a full-court-press to convince the world that the levitation of nominal equity prices is indeed the start of something new and secular - as opposed to the inevitable consequence of global monetary experimentation. To wit, Goldman has done an excellent job of divining the seven previous regimes within the volatility (or VIX) cycle and believes (with 89% probability) that we have entered a new 'great moderation'-like eighth regime. They are happy to admit that the ECB 'promise' to remove the left-tail, and the Fed and BoJ's work to open-endedly compress realized volatility is to blame - but the current VIX levels would imply a notably lower (than 2012) realized volatility on average throughout 2013. However, the back-end of the curve remains steep (and unyieldingly less ebullient), the skew is extremely complacent, and as every premium-selling call-writing 'this-is-easy' trader knows picking up nickels in front of the steam roller works well - until it doesn't.


Are we in a new regime for VIX? or is it simply over-confidence in central-banks' short-term ability to maintain the optics?


and in detail:

But it is still different this time from during the Great Moderation as the longer-dated protection market remains bid...


and the skew is extremely complacent:


It would seem that curve steepeners and skew compression have been paying too well for too long and at some point the crowded trade becomes the pain trade... especially with implied vol now trading inside of realized vol once again...

So, while Goldman suggests we are indeed in a new lower VIX regime, we humbly suggest that VIX regime switching has accelerated in this peculiarly binary outcome world of low-growth or depression scenarios... and with currency wars escalating already, the opportunity for a risk flare seems more probable than possible.


Charts: Bloomberg and Goldman Sachs

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Tue, 01/22/2013 - 22:16 | 3177630 LetThemEatRand
LetThemEatRand's picture

Fuck you Bernanke.

Tue, 01/22/2013 - 22:32 | 3177671 flacon
flacon's picture

S&P may go to 1500... just a caution:


Daily S&P500 FREE Ichimoku, Candlestick and Fibonacci analysis for January 22nd 2013


Tue, 01/22/2013 - 22:49 | 3177709 Richard Chesler
Richard Chesler's picture

In search of the greater fool.

Fuck you Goldman.


Tue, 01/22/2013 - 22:53 | 3177720 FL_Conservative
FL_Conservative's picture

Please clear the last 7.44 and fucking collapse already.

Tue, 01/22/2013 - 23:30 | 3177831 philipat
philipat's picture

VXX 3Q 2011=200

Yesterday= 23

Ouch....but don't bet against the Fed??

Wed, 01/23/2013 - 00:00 | 3177904 flacon
flacon's picture

It's normal for derivative products like the VXX ETF to have decay - although I agree the VXX has some severe decay. Never go long the VXX unless VIX > VIN > VIF (backwardation) and even then you have to day trade it - don't hold for more than a day or two. Instead of going long the VXX you could go short the XIV. Another trade that some people have had success with is shorting VXX on a longer term timeframe, like you said there is a lot of money to be made going from 200 all the way down to 23. 



Sat, 01/26/2013 - 03:43 | 3187439 MeelionDollerBogus
MeelionDollerBogus's picture

I heartily disagree. Using the shares the smart thing to do is to buy what you deem a good % opposite to the on-going bull-peak

http://flic.kr/p/daxu6H , http://flic.kr/p/dJ82Fn - Picking the next market top zone to short

using a scatterplot to determine a good entry point & target exit days to weeks later.

If you want to day trade the smarter move is using SPY puts on the way down for the market, VXX puts on the way UP for the market (provided at the time VXX with current split/reverse-split has a linear move drop to come that’s worthwhile). Again, that’s what the scatterplots are for

http://flic.kr/p/dHiJzF - over-all decay with periodic gains-slope

http://flic.kr/p/dHpavN - picking a target along the current slope for gains at the market-peak zone

Wed, 01/23/2013 - 02:40 | 3178170 clara-to-market
clara-to-market's picture

Ben Bernanke is an evil zombie.

And Geithner is his demon lover.

Let's cornhole the bastards.


Tue, 01/22/2013 - 22:17 | 3177631 max2205
max2205's picture

Could drop another 99%

Tue, 01/22/2013 - 22:19 | 3177638 prains
prains's picture

what's needed now is a vapo rub

Tue, 01/22/2013 - 22:22 | 3177642 Dr. Engali
Dr. Engali's picture

I wouldn't be surprised if one day we woke up to a market that looks like the BATS IPO & everybody will be scratching their head wondering wtf happened.

Tue, 01/22/2013 - 22:22 | 3177651 Bawneee Fwank
Tue, 01/22/2013 - 23:26 | 3177815 Freddie
Freddie's picture

I checked out your blog. Band of Brothers aka that CS'er Spielberg is all for Obam and destroying your country.  Stop pimping Hollywood.  They hate you and hate America.

Wed, 01/23/2013 - 11:38 | 3178934 Bawneee Fwank
Bawneee Fwank's picture

It is not my blog...Just posting it because I like what it says.

Tue, 01/22/2013 - 22:27 | 3177661 Nid
Nid's picture

Shit, I fucking hope so. Being tortured in VIX related trades right now.

Tue, 01/22/2013 - 22:48 | 3177708 ricky2
ricky2's picture


Tue, 01/22/2013 - 22:51 | 3177718 realtick
Tue, 01/22/2013 - 22:57 | 3177737 Bunga Bunga
Bunga Bunga's picture


Do not worry, economic rules do not apply in central planning. All the goals of the 10-year plan will be reached. There is no possibility of failure in central planning, because printing and propaganda are very powerful. Do not fight central planning, you will lose your money in any case. Better join central planning, be calm, do not think too much, follow the instructions of the media outlets and you will be happy. For those unwilling to agree with central planning, central planning will use new technology like social networks, drones, RFID vaccines to track down hostile elements.

Wed, 01/23/2013 - 10:57 | 3178774 Jake88
Jake88's picture

fear and greed will rule in the end.

Tue, 01/22/2013 - 23:06 | 3177765 chump666
chump666's picture

The market is too positive.

That is a bad thing.

Very bad.

Tue, 01/22/2013 - 23:07 | 3177767 ekm
ekm's picture

That is an excellent thing.
It's going to crap.

Tue, 01/22/2013 - 23:19 | 3177796 chump666
chump666's picture

I know and doomers should be more positive.  Because we will get our market flush.

And it will be mighty. 

Tue, 01/22/2013 - 23:39 | 3177857 lewy14
lewy14's picture

Right now, the two most beautiful words in the English language... 

...exogenous shock. 

Tue, 01/22/2013 - 23:41 | 3177868 ekm
ekm's picture

Wishing and waiting that the casino collapses is not dooming. It's progress.


Dooming is equal with stock manipulation.

Tue, 01/22/2013 - 23:20 | 3177798 Freddie
Freddie's picture

When will the RUT take a dump?  It is insane.

Tue, 01/22/2013 - 23:32 | 3177834 ekm
ekm's picture

When? Only God knows. Timing belongs to God.

Who? Executive order from Obama, same as in 2008, executive order from Bush.

Why? Crude oil prices.


Threshhold crude oil price pain in 2008 was $140. After 5 years of ongoing depression, what's the current threshhold?

Tue, 01/22/2013 - 23:18 | 3177789 earleflorida
earleflorida's picture

nah... there just loadin up the majic carpet ride with more greater-fools before they pull the rug and reload-- all's well that ends well for the ringmaster

Tue, 01/22/2013 - 23:29 | 3177824 ekm
ekm's picture


Tue, 01/22/2013 - 23:36 | 3177846 Bunga Bunga
Bunga Bunga's picture

"too positive" - such a rule is so 2000ish and does not apply in central planning. BTFP[lanned]D!

Tue, 01/22/2013 - 23:31 | 3177832 pragmatic hobo
pragmatic hobo's picture

vix on sale ... btfd.

Tue, 01/22/2013 - 23:37 | 3177852 electricgorilla
electricgorilla's picture

I feel like this is Rothschild at the exchange when there was the battle of waterloo. You know the story. Rothschild sells bonds to give the impression that the battle of waterloo was lost, then buys them all back before the news reaches the market that the battle was won. The market is giving the impression that everything is fine and we will reach glorious heights. That means liquidate everything and sit in cash or go short. Once that news reaches the market or reality sets in, which it will (i believe in the next 6 monthes) we get a good 15-20% correction on the S&P 500. I'm not believing the hype here. 

Wed, 01/23/2013 - 00:30 | 3177975 NoClueSneaker
NoClueSneaker's picture

Wichsen aka VIXEN means wanking in german. IMHO we're in the genuine turbo VIXen regime :-P

Me no clue, don't shoot me. BTW I miss Michael ....

Wed, 01/23/2013 - 01:01 | 3178028 Itch
Itch's picture

All kinds of errors here. The design of the experiment and sample size is meaningless...the 89% remarks are childish.

Wed, 01/23/2013 - 01:12 | 3178054 prains
prains's picture

is that with a +/- of 11% error on your ""survey'''

Wed, 01/23/2013 - 02:04 | 3178122 q99x2
q99x2's picture

The fewer people that have what everyone else wants the more likely the conclusion.

Wed, 01/23/2013 - 03:26 | 3178216 Grand Supercycle
Grand Supercycle's picture

Wile E Coyote sell off awaits...

As mentioned – central bank intervention prolongs and postpones but can not oppose natural market forces indefinitely.


Wed, 01/23/2013 - 10:05 | 3178588 StandardDeviant
StandardDeviant's picture

Thanks, Tylers.  This is the sort of article that makes it worthwhile coming to ZH.

Just a question: Anyone know what the Y-axis is on the "Complacency" chart - the one with the green line?  Skew between what?

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