Weekend Review – VIX Options and Futures – 4/18 – 4/22

VIX moved down and the curve shifted lower as well. This sort of comment had been leading off this blog more often than not for years. I’m just surprised I’m saying it during what was expected to be a transitional year from a low to high volatility regime. The only bearish feature below is how steep the curve is. A few more weeks in the 13’s and we’ll probably see a flattening of the curve.

VIX Curve Table

Late last week it was pointed out to me that the VIX had closed under 20.00 for 37 days (now 38) which was the longest period of sub 20 closes for the fear index since December 2014. My initial thought was this was an insignificant streak, which was proved correct when I ran the numbers and found that for 558 trading days, from March 24, 2004 to June 9, 2006 VIX closed under 20.00. The S&P 500 also rose only about 15% over that time period, which I did find surprising.

One final note about VIX under 20.00. I was asked by one of my twitter buddies how would an investor fair if they were only in the market when VIX is below 20.00. My guess was some sort of under-performance due to VIX remaining above 20.00 as the S&P 500 rebounded from the Great Financial Crisis in 2009, but I needed to check the numbers to be proven right. My four-minute analysis involved checking what happens if you own the S&P 500 when VIX is under 20.00 and avoid the market when VIX is above 20.00. My time fame went back to 1990 and here are the results. From the first day of 1990 through this past Friday the S&P 500 has moved up by 1738 points. If you had been in the market only on days following the VIX closing under 20.00 you would have realized 615 points of profit. I guess it’s ok to be long stocks when the fear index indicates higher than average fear in the market.