VIX spot hit its lowest level since June 2007 today, getting all the way down to 13.22 before bouncing a bit. There are a few periods over the past 20 years where the VIX has traded between 10 and 15 for an extended period. The 1993-1995 period had the interest rate scare of 1994, but was relatively calm otherwise, and the 2004-2006 credit boom period had a few spikes above 20, but was relatively calm as well.
After all the concerns about the fiscal cliff, options traders are displaying less anxiety about the upcoming debt ceiling debate. However, the VIX futures term structure is much steeper now than last week, indicating expectations of low volatility now followed by potential for more volatility in March and April.
Here is last week’s snapshot:
Compare that to today’s snapshot:
The SPX index is trading at almost the exact same spot as one week ago, but VIX futures are uniformly lower. VIX spot and Jan VIX futures are down a good chunk (around 2 points), while Mar, Apr, and May VIX futures are only down around 0.25-0.5.
One clear takeaway is that the options market is expecting very little impact on the broader SPX index from individual company earnings over the next month. In other words, little expectation that the micro news will affect the macro market. A stock picker’s market indeed.