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Is the VIX On Fire?

I'm going to put on my grumpy statistician hat on for a little bit.

In terms of sentiment, often when we get a nice countertrend move, the perception is that it is a much larger move than what it actually is. We saw this back in the crash of 2008 as well as during the huge bull run that has taken us to where we are.

Now with a nice pullback in the markets, it appears that volatility is back. The stocktwits stream (see $VXX and $VIX ) are full of notes of the huge move in volatility. Let's take a look at some vol on vol action to see if this is true:

First off, the VIX on its own can be perceived as oversold, with a reading right now of 17.84-- but remember that the current realized volatility for the past 20 days in the SPX is 7.56-- so there is a large premium right now.

So we have a huge 10% move in the VIX today-- that amounts to about a 1.5 uptick in the statistic. The average range over the past 14 days is down to about 1.25 but it was 1.5 earlier this month. So this move is inline in respect to the near term action we've been seeing in the VIX.

Could this be the bottom for volatility? The evidence is not yet pointing in that direction. I hope it does bottom though, this is getting boring for premium sellers.

by Steven Place

Steven Place is the founder and head trader at