2 VIX Extremes Not Seen Since 2016

The last time the VIX 20-day BTO call/put ratio was this low was in the early innings of the Trump rally

Feb 22, 2018 at 12:33 PM
facebook twitter linkedin

About two weeks ago on Feb. 6, the Cboe Volatility Index (VIX) broke out above the 50 mark for the first time since August 2015. This volatility explosion coincided with the worst week for the U.S. stock market in years. Since then, the market's "fear gauge" has retreated back to 18.41, though this remains well above its one-year average daily mark of 11.78. But amid this stock volatility, VIX call buyers have seemingly vanished.

Specifically, Schaeffer's Quantitative Analyst Chris Prybal noted that the VIX 20-day buy-to-open call/put ratio clocked in at 1.85 yesterday. While top-heavy on an absolute basis, it marked the lowest reading since Dec. 1, 2016 -- when the stock market was in the early stages of the Trump rally. This indicator topped out at a short-term peak of 5.12 on Jan. 12 -- when spot VIX was hovering around 10 -- meaning the VIX call/put ratio fell almost 64% over the past five-and-a-half weeks.

vix 20day bto c_p feb 22

Prybal also pointed out that the current reading on the VIX premium settled at negative 20% on Tuesday -- marking the first discount since October 2016 -- and closed yesterday at negative 22%. The VIX discount marks the difference when spot VIX falls below the 20-day historical volatility of the S&P 500 Index (SPX), suggesting S&P options are pricing in lower volatility expectations over the next month versus its realized volatility in the four weeks prior.

vix discount chart feb 22

Grab your FREE Eternal Contrarian report!


Special Offers from Schaeffer's Trading Partners