The past week in the VIX has been quite the roller coaster. Here is the 1 year chart to show the rapid nature of the recent fall:
The VIX has hit 15 many times in the past year, but never in such a rapid fashion from above the 20 level. Clearly, options traders got increasingly nervous about the prospect of no deal as the deadline approached, though illiquid holiday markets also surely played a role.
Here is the snapshot from my Dec. 19th post:
Compare that to today’s snapshot:
The SPX index was trading at 1435 on Dec. 19th. The SPX index is about 1% higher today. In that context, the current level of the VIX does not seem that unusual. In fact, VIX futures are almost completely unchanged since the snapshot from 2 weeks ago, across all maturities. In that context, the recent move lower on Monday and today is simply a reset that takes into account the removal of the tail risk of no deal.
Having said that, we have just turned the page on a new calendar year. Earnings season awaits, and ISM non-manufacturing and payrolls data will be released this Friday. With that backdrop, the VIX is probably on the low end of its range. The majority of market participants will be back at work next week, and options buying likely picks up as a result.