Equity Volatility Plunges To 17 Year Low

Tyler Durden's picture

It is perhaps no surprise that VIX has dropped to new six year lows today as the volatility of the underlying equity market has now been repressed to its lowest point is 17 years. Not since 1996 has short-term realized volatility been this low. The premium (between implied and realized volatility) continues to compress as options traders scalp the difference but increasingly that trade will feel like those nickels just ain't worth the impending steam-roller's wrath. As we noted last night, implied vol skews are as complacent to any downside risk as they have been since before the crisis was even being considered...

Realized Vol...


Implied Vol...


Downside Risk Complacency...


and it seems stocks are disconnecting for now...


Charts: Bloomberg

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Ostapuk Ivano's picture

Is Sara Eisen wearing a push up bra or did she get "work done?"

Jacque Itch's picture

Nope, not with the Fed doing the voodoo they do

Divided States of America's picture

Someone is fucking around with the implied vol structure....and not just for the VIX but for individual names....Example yesterday for TRIP (TripAdvisor)...the stock tanked 7%, biggest fuckin drop in over half a year..If you bought puts the day before earnings, I think the IV was around 50 to 60...that being expensive but hey, if you need to hedge the long position, you gotta buy it. Well low and behold the earnings reaction was bad and the stock tanks. If you had puts on TRIP to hedge, well you got screwed twice because the Long position was down 7% and your puts were breakeven or down also. This was because the IV dropped from 60 to 30 and this on a day the fuckin stock dropped 7%! Someone is fuckin around...you cant even hedge your own positions anymore...

So whatever they are doing to the VIX by constantly selling vol, they are doing to other stocks too via option IV. I guess who wouldnt write puts or sell vol if Bernanke and other Central banks keeps supporting the stock market. I think now its gold and silvers turn to be sold down to fund this effin stock market rally. when and if every fuckin asset is sold off to nothing is when this ponzi market collapses...

Scalaris's picture

Agree, as the market rallies, there is less demand for protection, hence volume of puts declines along with the implied volatility, courtesy of the free credit supply from the Fed, and the deb-ceiling deadline being pushed towards the end of April, in order to prolongate the exuberance at least until the programmed spring downhilling of "Sell in May'' axiom leads into the usual summer dejection, where perhaps volatility will be ripe for a concerted pump once again, until things are refixed and greenshoots sprout everywhere.

StandardDeviant's picture

It's not really "fuckin around", DS.  The options on most stocks behave this way just before earnings.  If you look at a chart of IV vs. time for, say, AAPL, you see a nice, tradeable-looking spike every quarter.  But if you think (as I did once) that you can make money by selling vol in advance of earnings, well, best of luck with that.

The thing is, when you learn about option pricing formulas like Black-Scholes, you're told that volatility is one of the inputs.  But in real life, market makers are pricing options based on supply and demand, like anything else.  IV is simply the magic value you'd have to plug in to the formula in order to arrive at the price that people are really asking.

Before earnings, as you say, lots of traders need to hedge, so demand is high and MMs adjust their pricing accordingly so as to keep their deltas manageable; that equates to higher IV.  Also, if a big event such as earnings is due to occur close to expiration, when time decay is normally high, the price of the options is likely to stay more or less constant until the outcome of the event is known; the options become a binary play on whether the outcome exceeds expectations or not.  (Look at the value of the ATM straddle to get an idea for the market's estimate of the size of the expected move...)  But given that time is passing, maintaining a constant price means that the IV is effectively going up in order to counterbalance the time decay.  Best not to pay too much attention to IV in those sorts of situations.

(Sorry if this is blindingly obvious to the pros here.  Took me a while to catch on to, so I thought I'd pass it along.)

Boozer's picture

I find Miss Eisen to be a tasty morsel as well Ivan.

Will put on Bloomberg and see for myself regarding possible "work done".

Is she a bit more "perky".....

Ostapuk Ivano's picture

Yes. She was seriously a full cup size larger. I think she wears the heavy duty padded bra's perhaps to compete with Trish Regan. I am glad you are a fan.

knukles's picture

Hey'd you ever see that clip when she was sitting down and had her skirt pulled up with what looked like a big "microphone" taped between her legs?
O lah lah....

SheepDog-One's picture

'Advertisements'- 'During ObaMao's second term a 'specific event' will occur that will bring 'vast wealth' to america, ObaMao will use this 'new wealth' to further his socialist agenda and in the process, americlowns will praise Dear ObaMao....click here to see the details'.

Huh....giant 5,000 ton solid gold meteor comin?

All I needed to know this entire shit edifice is about to get swept out in the undershit of a Shitnami wave. 

Shitwaves. shit waves - YouTube

nobusiness's picture

Anyone else notice SPY volume spike?

SheepDog-One's picture

Gotta rush to buy as much SPY as they can here at all-time record bubble top highs! Can't get left in the dust.

Falconsixone's picture

Weee're building a Volatility Plunge of extraordinary magnitude. Hand me that death craw.

swissaustrian's picture

It's all coming together:

Record low vol

Massive margin debt

Sky high forward P/Es

Gold beeing fled like it's 1999

Upcoming ITexit after Bungas election

Upcoming US budget theater + 10y above 2%

Surging foreclosure rates in the US

Upcoming Iran nuclear theater

Upcoming Japanese Implosion

What could possibly go wrong?


Atlantis Consigliore's picture

go ahead Berflunky, print another Trillion or two, no bonds, no bonds, no bonds. LOL

we gotta get da suckers to buy Houses, with the illegals.  for visas. 

and Cue washed up Actors,  bye bye bye Gold...whats stolen from your wealth? LOL

adr's picture

Goldman Ney York selling to Goldman Italy, so Goldman Italy can sell to Goldman Spain, who can sell to Goldman France, to sell to Goldman China, who sells to Goldman Japan, who sells back to Goldman New York.

Profits everywhere!!!!!

Mr Lennon Hendrix's picture

Bernanke's pair trade:

Short VIX/Long SPY

He is a proud little banker!

falak pema's picture

HFT bunga bunga'd the VIX ! 

That ain't a crime that is just normal HFT business. 

nobusiness's picture

Market and vix dropping.  Everything makes sense.

nobusiness's picture

If today ends down it will be the first down Friday all year.  So I expect massive 3:45 rally

scatterbrains's picture

Feels like the top is in to me..  we are into the .666 time window of the previous bull leg with gold already  front running (gold always knows) a plunge coming next week.. which is being orchestrated to take down oil or so I'm thinking...  remember 666 bitchezz!


Glass Seagull's picture



We hope that your perceptions of equity markets have now changed, and you'll commit more money to stocks.



Berdie Thirdythree

Shell Game's picture

VIX is the new UNG   ;)

NoWayJose's picture

If the global recovery was 'real', commodities would not be down so much today.

El Hosel's picture

Plunge team plunges the $vix. "Markets" without fear Bitchez, that's what Benny is talking about.... Mo greed mutherfuckers.

you enjoy myself's picture

alternate title: Central Planning Surges to 17 Year High.

dcb's picture

I wish they still published prop desk data, I remember when zh put it up. I'd like to see it right now, esp the past two days. I assure you the majority, or a good portion of the trades is from one firm manipulating the market. there are no humans doing this trading, beause it's not even lose to a human trading pattern. this is one firms algo going crazy, in a really low volume market

larz's picture

learn how to finance a long vol position - it will pay well

Bunga Bunga's picture

Booyah, we are back in 1996! internet bubble has 4 years to go and then follows the housing bubble. Let's party it's like 1999.