It's official. Volatility is dead. Markets are grinding higher, and the VIX can barely stay above 10.
Extreme complacency, right? If nobody is buying protection then it clearly means that the collective market zeitgeist expect the market to go higher.
You've also got a TON of traders loaded to the gills with short volatility products.
This sets us up for a massive squeeze in volatility, right? That's what I've thought... but so has everyone else.
Enter... the VVIX.
This indicator measures the demand for VIX options.
And it remains well off the lows. By a wide margin.
So what's going on here?
More and more institutional hedging has shifted from SPX options to VIX options and other volatility products.
And the whole narrative of the "volatility squeeze"-- it's kind of an open secret, and the risk is being priced into VIX options.
That means we're not actually seeing massive complacency in this market. Risk is being priced in as good as it can be.
Now if we manage to see the VVIX break below 80, that will be excellent timing to throw on some hedges in the market.