As The VIX Crashes To Record Lows, Here’s An Incredible Stat…

Nothing to see here...

Right, so as you’re probably aware by now, just as the Fed decision hit, the VIX did this:


Blame the machines. Whatever.

Probably best to just call it a sign of the times. Of course the statement was dovish and all else equal that means the vol. seller’s paradise gets a new lease on life, especially now that the road from here to Jackson Hole has pretty much been cleared of hurdles barring some kind of geopolitical land mine.

We, and plenty of others, have exhaustively detailed the extent to which the perpetuation of the low vol. regime is embedding greater and greater amounts of risk into the system by virtue of perpetuating a self-feeding loop that at this point, has conspired to create the conditions for a violent snapback that could be catalyzed by a nominally small spike in the VIX.

No need to rehash that here. You can read all you’d ever care to read in our vol. section.

For the purposes of this easy-on-the brain post, just consider a couple of fun factoids and charts out this evening from Deutsche Bank.

As the bank notes (and this is your incredible stat) “there have been 10 closes in the VIX sub-10 in 2017, higher than all sub-10 VIX closes for other years since 1990 combined.”

Also, consider that “3 out of 4 days in 2017 has seen the a sub 12 VIX close, which is the highest fraction of trading days with sub-12 VIX since 1990.” 


This does not always end well:


But so far, so good-er-er asthe maximum drawdown the S&P 500 has seen this year is just -2.8% – which is highly unusual even in low volatility regimes (Figure 1). Looking at SPX returns since 1928, the median drawdown from the beginning of the year until end-July has been -9.2% and the only other period where the index had a lower max drawdown was 1995 (-2.1%).”


Nothing to see here…


1 comment on “As The VIX Crashes To Record Lows, Here’s An Incredible Stat…

  1. ptaffet says:

    Move along. Move along.

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