"Volatility at World's End: Two Decades of Movement in Markets"

Fascinating Indicator - Realized Volatility Premium

Macrofugue posted a chart of an interesting indicator: the realized volatility premium on the S&P 500. (The realized volatility premium is the implied volatility (VIX) minus realized volatility.)

As they put it, "when [the realized volatility premium is] positive, it has presaged increases in implied volatility -- as options writers may have under-priced volatility relative to what has been realised."

If options sellers aren't charging enough - which is what a negative volatility premium means - that is a sign of complacency. It makes sense that these complacent periods are major market tops that precede breathtaking declines.

Wow!!

"August S&P return was in the bottom 10% of monthly returns since 1928. Over that time 58% of monthly returns have been positive with an average return of 0.6% (7.4% annualized). August volatility was in the 98th percentile over that period at more than triple its 15% average since 1928. Just 25 out of 1004 months over the past 83 years have experienced higher realized volatility than August 2011."

Heard on Twitter

I can find only 2 other times $VIX up 35% to a one-year high. 10/19/87 and 10/13/89. S&P was up +5.3% and +2.8% next day, FWIW.$$

FT: "The Calm Before the Volatility Storm" (VIX)

"The chase for yield has made selling volatility a popular trade, and this has been a factor in low implied and realized vols. At the same time, growing macro (crossasset) portfolios likely contributed to the rise of cross-asset correlations. Hence, an extremely accommodative monetary policy may have simultaneously resulted in low volatility and high cross-asset correlations."

VIX Slumps to Lowest Level Since 2007

Wow: VIX Slumps to Lowest Level Since 2007. Which means... there's never been a better time to buy volatility!

Seriously, I think it makes sense to have a fair amount of assets in put premium right now. Although, owning TLT calls works just as well. (Unless you think that Treasuries won't benefit from a flight to safety anymore.)

All of a Sudden

People are starting to care about all the countries on the verge of toppling.

Two of the moron momentum favorites, F and AMZN are getting hit hard.

It was absurd for volatility (VIX) to be hitting lows this month.

Volatility (VIX) Still Dangerously Low

The S&P 500 volatility index (VIX) is once again really low - back to April 2010 levels.

However, periods of low volatility in the stock market are always followed by periods of high volatility.

Momentum "investors" in Coinstar (CSTR) got a hint of this tonight.

Falling Volatility Index (VIX) is Another Sign of Complacency

The S&P 500 volatility index (VIX) has fallen to 18.55, which is the lowest level since late April.

The VIX is quoted in terms of percentage points and translates, roughly, to the expected movement in the S&P 500 index over the next 30-day period, on an annualized basis.

The current VIX price of 18.55 represents an expected annualized change of 18.55% over the next 30 days, meaning a change of plus or minus 5.4% during the next month. To be precise, options on the S&P 500 assume a 68% chance (one standard deviation) that the magnitude of the S&P 500's 30-day return will be less than 5.4% (up or down).

Lower expected volatility is another sign of investor complacency, along with other sentiment indicators like put/call buying ratios and the AAII survey.