This time is different. I learned early in my career that when you hear those words you should take the other side of whatever statement comes next. However, this time when the S&P 500 made a new all-time high things were definitely different in the volatility markets. Check out the curve below for an indication of what I’m talking about.
Note that I’ve added a third line to the VXST – VIX – VXV – VXMT term structure chart. I usually do this on the weekend when there has been a mid-week volatility spike. This time I went a little farther back to when the S&P 500 peaked out at 2011 on September 18th which was the previous all-time high. The purple line shows that implied volatility for SPX options over multiple time frames was much lower than it is now. Higher implied volatility can be interpreted as market participants being a little more worried about the direction of the S&P 500 over the near and intermediate term.
Another chart that caught my eye, and shows market concern, shows up below. VVIX, which is basically VIX of VIX, continues to be well above the 2014 average of around 80.00. This is an indication of increased demand for VIX options which usually shows up on the call side which is where traders put money when they believe the stock market may be due for a correction or pull back.
Finally, the long oriented exchange traded products were lower, but not as much as the over 12% drop in VIX.