With Market Complacency Back, Realized Vol Flashes Red Light

Tyler Durden's picture


The 20-day realized volatility of the S&P 500 ETF (SPY) has more than doubled in the last two months from a low near 7% to the current level over 15%. At the same time, implied vol (akin to VIX) has dropped 2-3vols during that period and almost 5 vols in the last two weeks - nearing its multi-year lows once again. For the first time this year though, 3-month-implied volatility is trading below realized 20-day volatility and while they are apples-to-oranges to some extent (forward-looking vs historical), the 'cheapness' of volatility may well be enough to encourage hedgers back in - especially on a day when stocks pop unexpectedly. What is more worrisome though is almost exact replica that implied- and realized-vol are following when compared to last year in the run-up to the big mid-summer swoon as complacency is back it seems.

Current (2012) Implied- vs Realized-Vol

2011 Implied- vs Realized-Vol

Realized from around 7% to around 15%; Implied leaking lower, popped from 15% to around 20% and then back to around 15%; Implied vol crosses below realized vol; One-month later...

Chart: Bloomberg

Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 05/01/2012 - 14:35 | 2388840 SMG
SMG's picture

There are lots of good bear cases, but it seems like they are never going to let this market drop. 

Tue, 05/01/2012 - 14:39 | 2388855 Boilermaker
Boilermaker's picture

And, you Sir, have said the only thing that means a god damn thing.


Tue, 05/01/2012 - 15:13 | 2388951 CvlDobd
CvlDobd's picture

How 'bout them REITs?

Apple seems to be changing from a BTFD to a STFS stock.

Tue, 05/01/2012 - 15:17 | 2388962 Boilermaker
Boilermaker's picture

IYR and it's core compenents just keep sailing higher and higher...valuations be damned. 

Same pattern every fucking day.  Sell off that open, halted abruptly by the 'invisible hand of the market', and strapped to an ICBM and lifted into orbit.

Somebody is pretty god damn keen on keep those bastards up...and up again.

Tue, 05/01/2012 - 15:22 | 2388992 CvlDobd
CvlDobd's picture

Like I said. I named that chart pattern the boilermaker for ya.

I also own the only REIT not up today I think. No boil in PCL.

Tue, 05/01/2012 - 15:17 | 2388964 SilverTree
SilverTree's picture

Green or bust!

Tue, 05/01/2012 - 16:35 | 2389251 Randall Cabot
Randall Cabot's picture

Holy shit!!! Why the heck did the Russell end red today???


Tue, 05/01/2012 - 14:46 | 2388883 SheepDog-One
SheepDog-One's picture

Never, until they do drop it, no tree grows to the sky.


Tue, 05/01/2012 - 15:02 | 2388921 HarryM
HarryM's picture

No tree grows to the sky , but they do live a very long time - 

Tue, 05/01/2012 - 20:04 | 2389724 CPL
CPL's picture

Why do people assume they are trees.  Could just as well be stinging nettles.  Try getting rid of one spread every where from the lawn, then next to the shed after a while to the bond market.  Bam.  Sitting on junk bonds picking barbs out of fingers with tweezers.

Tue, 05/01/2012 - 14:38 | 2388851 battle axe
battle axe's picture

What is the saying? "Sell in May and go away".....

Tue, 05/01/2012 - 14:41 | 2388862 francis_sawyer
francis_sawyer's picture

I sold in May a few years back & went away permanently... And the rest, as they say, is history...

Tue, 05/01/2012 - 15:03 | 2388922 Dr. Richard Head
Dr. Richard Head's picture

Amen to that.  Haven't place a single FRN in the market since I withdrew it all in 08. 

Tue, 05/01/2012 - 14:46 | 2388881 SimpleandConfused
SimpleandConfused's picture

It is saying the simple thing:


This market will not pause until 14K DOW and even then only briefly until 16K DOW.  The S&P will be at 1800 soon enough.

But quickly now ZH'ers, into your off the grid bunkers.  There are gold bars to be polished. 

Wish the downturn you guys always talk about would finally happen; I am sick of the crowded roads and shopping centers.  It looks like a boom evertime I go outside be it Chicago, Miami, LA or Dallas.

Me thinks ZH is just kinda, somewhat, perhaps way on the wrong side of the outlook here.

Markets up, unemployment down, crowds busting out all over. 

Junk me in a hurry; wouldn't want anyone to be infuenced to think for themselves here in the echo chamber.

Tue, 05/01/2012 - 14:49 | 2388892 SheepDog-One
SheepDog-One's picture

^^^ best fitting name of all time.

Tue, 05/01/2012 - 14:53 | 2388903 resurger
resurger's picture


Tue, 05/01/2012 - 14:57 | 2388914 blunderdog
blunderdog's picture

Look, everyone.  Harry's back.  And he's wearing makeup.

Tue, 05/01/2012 - 14:57 | 2388915 Deep79
Deep79's picture

No Junk from me. I always say everyone should listen to both sides. 

Now about packed malls and boom times, i really dont know about that. Just look at the #'s. With record amount stimuls in the history of man, and all the FED meandering, all we can buy is 2% GDP growth. I dont know what boom times you speak of, but if you are the upper 5%, ya it is boom times for you, but for the rest of us its a depression.

We have record low interest rates, record debts, and this is all we can buy. And about employment going down, are you really serious or just trying to stir the pot. Y aif the U3 is goijg down becuase people are dropping out of lobour force, is that really healthy?

Maybe you have just bought into the all the hype and propaganda, but if you look closely, we are in fro a world of hurt. As I have said many times on here, when I dont know, could be tomorrow, next week, next month, but within 3 years is a pretty good guess. 


Tue, 05/01/2012 - 16:13 | 2389193 banksterhater
banksterhater's picture

It's not 2.2% GDP- they're(BEA) using a corrupt criminal delater of 1.5% instead of at least 2.8%, by their own sister agency's numbers.

Tue, 05/01/2012 - 15:06 | 2388923 francis_sawyer
francis_sawyer's picture

So... RobotTrader came back as 'SimpleandConfused'...

Appropriate, I'd say...


 "It looks like a boom evertime I go outside"

Oddly enough, everytime I look at the Fed or other central bank balance sheets, it looks like it's about to go BOOM too...


Tue, 05/01/2012 - 15:18 | 2388967 battle axe
battle axe's picture

SIMPLE: Do you know anything about, oh say MATH? Because big guy, you really do not seem to understand how finance works..But all opinions are welcome...

Tue, 05/01/2012 - 15:16 | 2388956 B-rock
B-rock's picture

It looks like it's STFS today...

Tue, 05/01/2012 - 15:22 | 2388988 skepticCarl
skepticCarl's picture

Simpleand Confused, you need a refresher on the Zero Groupies ten commandments:

1.      Thou shalt be a Bear, by God.

2.      Thou shalt not tradeth Gold in vain, but buy only physical. For the gold bugs will not hold him guiltless, who shorteth Gold, or tradeth in paper in vain.

3.      Remember Bear Markets, to keep them holy.  We may never see another one again.

4.      Honor thy guns and thy ammo, for long may they be there to comfort ye.

5.      Thou shalt not buy stocks, except maybe some miner’s.

6.      Thou shalt not screw around with options and derivatives

7.      Thou shalt not discredit any conspiracy theory.

8.      Thou shalt  post “Eff Bernanke” and “End the Fed” in every thread, regardless of the topic.

9.      Thou shalt not covet thy neighbor’s 401k, even if it is flying with PCLN, CMG and AAPL.

10.  Thou shalt not respect the Fed Chairman, nor his banker buddies, nor the Treasury Secretary, nor the POTUS,  nor anything found in the Main Stream Media.

Tue, 05/01/2012 - 15:27 | 2389017 francis_sawyer
francis_sawyer's picture

There USED to be 15 Commandments...



Tue, 05/01/2012 - 14:42 | 2388861 tomRapheal
tomRapheal's picture

OT but this is great!  Someone told the "economists" in the NYFRB to "leave the building" to their faces.


Tue, 05/01/2012 - 14:43 | 2388864 streetcrawler
streetcrawler's picture

I need UVXY to pop before it goes to zero.

Tue, 05/01/2012 - 15:06 | 2388930 HarryM
HarryM's picture

Perhaps the big beat down before a run up?

Tue, 05/01/2012 - 14:43 | 2388868 Dr. Engali
Dr. Engali's picture

Time to take a summer vacation. I'm convinced that with each of these episodes the higher they take the market the harder it's going to be to contain the downside.

Tue, 05/01/2012 - 14:43 | 2388869 mammoth mo
mammoth mo's picture

Can't fight the Fed


No matter how stupid they are.

Tue, 05/01/2012 - 14:53 | 2388901 resurger
resurger's picture

yes you can, be patient

Tue, 05/01/2012 - 14:44 | 2388870 OldE_Ant
OldE_Ant's picture

lol.  The new Fed mantra, "Don't bend the trend." 

99 bottles of beer on the wall and no matter how much you drink they'll never fall. 

Drink enough and 99 looks like 198, which later will look like 396, and eventually all the beer bottles will merge into Marilyn Monroe skirt blowing in the wind, bent over smiling and beconing us towards her and JFK saying "ask not what you can do to your country, but what your country can do to you".

Tue, 05/01/2012 - 14:57 | 2388916 Doubleguns
Doubleguns's picture

Curious, just how long is this doing it to us gonna last. Lube free not doubt.

 I smell smoke!!!!

Dont think it can last much longer without a serious problem.

Tue, 05/01/2012 - 15:10 | 2388936 HarryM
HarryM's picture

Short inverse ETF's pairs (if you can find em) - should yield 15-30% per annum

Tue, 05/01/2012 - 14:53 | 2388904 tomRapheal
tomRapheal's picture

I've actually been thinking of an interesting trade.  Go short GLD and long phsyical, somewhere you can trust maybe Sprott.  As long as you didn't let your NAV get too far away in Sprott, you would make a fortune in a meltdown senario.


Talked to a insitiutional fund manager's CIO and he told me that they were using GLD and saw no problem with it.

Tue, 05/01/2012 - 14:55 | 2388908 YesWeKahn
YesWeKahn's picture

Don't fight the fed which is in a permenent emergency mode.

Tue, 05/01/2012 - 15:03 | 2388927 MFL8240
MFL8240's picture

This is a game and nothing more because Bernanke knows a change in the White House means a departure from his job.

Tue, 05/01/2012 - 15:23 | 2388997 dwdollar
dwdollar's picture

Eventually, the market is going to give up on Bernie. Eventually, Bernie will have to put some corn on the ground to keep the bulls stampeding toward him. Waving the bucket around only works for a while.

Tue, 05/01/2012 - 15:34 | 2389045 Deep79
Deep79's picture

Thank you my friend. As I say the market will test the FED soon and when they reliaze the FED is full of hiot air, they will break the FED. Market always wins over long-term, you can manipulate short term but market always wins



Tue, 05/01/2012 - 15:27 | 2389010 LongSoupLine
LongSoupLine's picture

Another chart saying we're "done" vs. another day of fiat printing and false propaganda.

Guess the winner...

fucking sick of this market floating on total horseshit!

Tue, 05/01/2012 - 15:33 | 2389040 skepticCarl
skepticCarl's picture

The actual and implied volatility in the high teens is about right: the S&P's daily fluctuations are a bit less than plus or minus 1%.  That's indicative of a "normal" bull market.  When the bear returns, we will see 2% down days quite often, and a $VIX in the twenties, maybe low 30's on big down days.  In the meantime, stay away from the VXX, UVXY, and TVIX until at least that first 2% down day.

Tue, 05/01/2012 - 16:50 | 2389308 paul_Liu
paul_Liu's picture

when is the -2% coming?

Tue, 05/01/2012 - 19:49 | 2389687 luna_man
luna_man's picture



Ahh, c'mon you guy's, let the CRIMINALS, play their games!...

The CRIMINALS, know what await's, when their games, come to an end.

Remember, NO PRISONERS!...Right?

Wed, 05/02/2012 - 00:18 | 2390276 Paracelsus
Paracelsus's picture

Deep79 ??? Is that deep69 plus ten?You need to see Dr. Ruth!

60's CIA Laos Opium,Nugan Hand bank,Australia

80's CIA Iran Contra,money laundering Cocaine,Panama,etc.

90's CIA Kurds Herion smuggling

00's CIA Afghans Opium,porous Eastern European borders (ain't Maastricht a Bitch,Can you say 500 Euro deductible for the stolen CD player outta your porsche,boys and girls? I knew you could! Send the bill to Langley,Va)

Common elements? A)Private Armies and B)Drugs at source 

Wed, 05/02/2012 - 01:19 | 2390325 The Proletariat
The Proletariat's picture


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