Equities Unch As VIX 'Premium-To-Realized' Nears Three-Month High

Tyler Durden's picture

Going nowhere fast was the theme today as equities managed to end practically unchanged (SPX/Dow down, NDX up) but intraday saw some very gappy behavior (though admittedly in a very small range). VIX is the story of the day in our view - realized volatility has dropped to near-record lows (which had, until a week ago, been a big driver of front-end implied vol compression) and yet VIX pushed higher (with implied vol now at almost a three-month high premium to realized). The point being - protection is bid, and a VIX of 16.5% is much more concerning given its premium than some would believe. Volume was above its very recent and dismal average but still around 15-20 percentage points below normal summer doldrums levels. Risk assets in general trod water today with modest outperformance by Treasuries (yields lower 1-2bps) and negligible moves in FX carry trades - even as the USD is down 0.35% since Friday (mirroring Silver's 0.35% gain). With Consumer confidence dismal, somewhat strangely both Consumer Staples and Discretionary outperformed on the day. Very low average trade size, a low high-low range, and a general inability to pull away from VWAP (+/-3pts only) suggested everyone is on hold (or buying protection as we noted above); but the small flush into the close was not very encouraging.

The Dow and S&P closed very slightly red and Nasdaq green - with a late-day stumble confirming the bias to VWAP...


...leaving broad indices leaking into the close but the Trannies still notably divergent...


Realized vol (orange) has dropped significantly in recent weeks (which will come as no surprise to anyone) but the last week has seen implied vols move higher against this. The premium between implied and realized vol (lower pane) is now near three-month highs - and so while some would see a VIX at 16.5% as 'normal'; the premium tells a much more concerned story.


and commodities generally leaked higher (except for Chinese-prone Copper) though nothing write home about...


The disconnect between Treasury yields and stock prices has reverted back to recent 'easing' highs - though we note our recent discussion of the more importance of real rates (and breakevens)...


and it seems that stocks and gold have slowed their exuberance in the last week as to the Fed/ECB's ability to reflate in the short-term (though 10Y TIPS remain active)...


Charts: Bloomberg and Capital Context

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RationalPrepper's picture

Ok, but what happens tomorrow...and the day after?  Does VIX go nuts in Q4 of 2012?


adr's picture

So nobody has a fucking clue.

The Bernanke speech hasn't been leaked yet and every algo is fishing for a hint.

Brother Sebastian's picture

The VIX has nothing to do with anything.  It's an overrated tool that doesn't tell you anything.  Watch price always.  The bastards who manipulate this pig of a market will take it wherever they want regardless of what the VIX tells you. 

flacon's picture

How come when ever there is a major market crash the VIX spikes like hell?

amadeusb4's picture

This kind of EOD market wrap up is one of the reasons why I come to ZH. Thank you, Tyler. Well done and keep up the good work.

bnbdnb's picture

Something to keep in mind....

SP500 would already be at 1500 if they could actually get it there.

gunsmoke011's picture

When you say "but the small flush into the close was not very encouraging." - I hope you are talking about if you are bullish. It wasn't much - but - every CRASH has to start somewhere.

God Bless The Virtuous's picture

How about I throw this out there and see if it sticks to the wall.

I think we can all agree that Bernanke is quite impotent here. Of his own making.

With oil and food prices up and rising, all QE would do is juice an already frothy market and kill the dollar.

The poor working man / woman would just get shafted as usual with their standard of living getting slammed again from the QE stun gun!

So I say, QE is off the table,(thank you lord), and the E.U. is in the process of unwinding.

There just is not the vast amount of money to save what in hindsight turned out to be a poorly planned socialist scheme!

Now back to my theory for our republic!


The markets will start to fall apart soon after Bubble Blowin Ben comes out of the closet with no new schemes to debase the currency and the markets will start the long awaited re test of the 2009 lows!

This will catch the communist in chief off guard, seeing as he has done NOTHING with regard to the countries well being since his re election campaign kicked off a few YEARS ago!

The ensuing crash will turn the republic off on his bullshit,(as most fools think he is a nice guy, someone to have a beer with), and then with Obummer standing with no proverbial clothes on, all will finally see him for the radical he is.

The market needs and will correct,

the stock market vigilante's will kill any hope of the second season of this un repentant anti-colonialist, anti American!

There has to be some counter balance to the lame street media shilling for this progressive / socialist and his ever expanding government takeover of all aspects of American's lives!

God save the republic

LooseLee's picture

Then, his partner in crime, Mitt Romney, will take over and solidify the total collapse of the financial system and economy. Done!

q99x2's picture

'so while some would see a VIX at 16.5% as 'normal'; the premium tells a much more concerned story'

Some money thinks no QE or war or meteor strike or solar flare or pandemic or false flag or maybe Greece will default and leave the EURO got me there.

Frank N. Beans's picture

...Trannies still notably divergent...


uhhh, yeah

HaroldWang's picture

And AMZN continues to make new yearly highs while touching all time highs. Things are moving, just gotta know where to look.

disabledvet's picture

In other "no news ever in the world" boring do nothing companies terrified that Amazon will put them out of business. Possibly just in time to ring in the New Year...