• 396 days Will The ECB Continue To Hike Rates?
  • 396 days Forbes: Aramco Remains Largest Company In The Middle East
  • 398 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 798 days Could Crypto Overtake Traditional Investment?
  • 803 days Americans Still Quitting Jobs At Record Pace
  • 805 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 808 days Is The Dollar Too Strong?
  • 808 days Big Tech Disappoints Investors on Earnings Calls
  • 809 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 811 days China Is Quietly Trying To Distance Itself From Russia
  • 811 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 815 days Crypto Investors Won Big In 2021
  • 815 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 816 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 818 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 819 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 822 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 823 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 823 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 825 days Are NFTs About To Take Over Gaming?
Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

Frank Hogelucht

Frank Hogelucht

Individual investor, trading for a living since 2007, taking a statistical approach in combination with historical market data and addicted to developing market-neutral algorithmic trading…

Contact Author

  1. Home
  2. Markets
  3. Other

Complacency at Multi-Month High

Besides the fact that even betting on a one-day decline (leave alone calling a top) has been a receipt for disaster during 2012 (so far), complacency has set in (again) among retail investors.

On Friday, January 20, the VXO (CBOE S&P 100® Volatility Index) closed at a 6-month low, and the (annualized) 10-day historical (realized) volatility is close to a 9-month low.

Whilst some blog authors and websites are suggesting to stay alert, or that a top might be in, a far better (compared to betting on a stock market top) opportunity might be presented due to the fact that for a couple of years now a bunch of (leveraged) Volatility ETFs are available to the retail investor (complementary to CBOE volatility futures and options).

Table I below shows the VXO (CBOE S&P 100® Volatility Index) performance (since 1986) one week later, at the end of January ('at month's end'), one month, two months and five months later in the event the VXO had not been this complacent over a 6-month period in January of a year (means the VXO had closed at a fresh 6-month low) in the past.

Volatility (realized and implied) almost always picked up shortly again (partly tremendously), and the VXO closed at a higher level one week later on 17 out of 18 occurrences, was up 1.0%+ at the end of January and one month later on all 18 occurrences, and higher 5 month later on 17 out of 18 occurrences as well.

VXO
Table I
VXO (CBOE S&P 100® Volatility Index) posted a 6-month low in January

Table II below shows the first occurrence (per year only). The VXO hit a 6-month low in January for the 10th time since 1986, and was always trading 10.0%+ above January's 6-month low at some time during the then following month.

VXO
Table II
VXO (CBOE S&P 100® Volatility Index) posted a 6-month low in January

Conclusion(s)

January's 6-month low with respect to the VXO (CBOE S&P 100® Volatility Index) might provide a favorable opportunity betting on implied (and historical) volatility picking up (possibly tremendously) over the course of the next couple of weeks and months.

Have a profitable week,

 


Disclosure: No position in the securities mentioned in this post at time of writing.

 

Back to homepage

Leave a comment

Leave a comment