VIX Hits (another) Post Financial Crisis Low

VIX hit a post financial crisis low (again) today and just for the heck of it I decided to look at the stock market the last time VIX was at 10.61 or lower. That date was February 23, 2007 when the S&P 500 closed at 1451.19 and VIX closed at 10.58. A year later the S&P 500 had lost 6.75% and VIX had worked up to 24.06. This is when we were at the beginning of the financial crisis. By November 20, 2008 VIX had worked all the way up 80.86 and the S&P 500 was 48% lower. The VIX part of all this is highlighted below –VIX Daily

Do not take all that negativity as any sort of prediction about where the stock market is going from here. February 23, 2007 was the 36th trading day in 2007 and 25 of those 36 trading days VIX close below 11.00. Heck, on January 24, 2007 VIX closed at 9.89! Today’s VIX close is the 3rd sub 11.00 since the financial crisis with all three of those low VIX closing dates coming this month. It is very possible that low volatility will be around for a while, however, at some point VIX will run to higher levels based on some foreseen or unforeseen stock market event. In the mean time we may want to enjoy the low volatility environment, the alternative (see October – November 2008) isn’t a lot of fun to live through.

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Russell Rhoads, CFA

CBOE Options Institute

Russell Rhoads, CFA, is a Senior Instructor with the Options Institute at the Chicago Board Options Exchange. He joined the Institute in 2008 after a career as an investment analyst and trader with a variety of firms including Highland Capital Management, Caldwell & Orkin Investment Counsel, TradeLink Securities and…