According to CBOE data it is not often that the volatility index trades at a sub-12.00 reading. Indeed you could almost count the occasions on two hands over the course of the past year. Yet despite a soggy start to stock trading on Monday morning, the cost of insurance fell back below that level as the cost of options insurance stagnated. Indeed the VIX index subsided to 11.82 Monday morning as investor indifference continued in response to the lackluster December employment report released at the end of last week. However, as stock prices weakened after lunch and as selling picked up, the CBOE’s VIX index has reversed course sharply to reach a session high at 12.72. Portfolio hedgers are clearly having a rethink about the odds of a correction as the market finds fewer fundamental reasons to look above recent all-time highs.
Chart – CBOE Volatility Index
(click to enlarge)