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

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SMG's picture

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

Boilermaker's picture

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


CvlDobd's picture

How 'bout them REITs?

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

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.

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.

Randall Cabot's picture

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


SheepDog-One's picture

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


HarryM's picture

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

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.

battle axe's picture

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

francis_sawyer's picture

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

Dr. Richard Head's picture

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

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.

SheepDog-One's picture

^^^ best fitting name of all time.

blunderdog's picture

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

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. 


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.

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...


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...

B-rock's picture

It looks like it's STFS today...

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.

tomRapheal's picture

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


streetcrawler's picture

I need UVXY to pop before it goes to zero.

HarryM's picture

Perhaps the big beat down before a run up?

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.

mammoth mo's picture

Can't fight the Fed


No matter how stupid they are.

resurger's picture

yes you can, be patient

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".

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.

HarryM's picture

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

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.

YesWeKahn's picture

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

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.

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.

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



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!

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.

paul_Liu's picture

when is the -2% coming?

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?

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