VIX, the CBOE “fear index,” and VIX ETFs fell again today, now resting at multi-year lows on investor optimism for earnings and budget ceiling debate.
VIX and VIX ETFs continued their recent decline ahead of earnings season and the upcoming spending cuts and budget ceiling debate. Read “Exchange Traded Funds Drift Higher Ahead Of Earnings”
Last week saw VIX fall a record breaking 39% when the fiscal cliff deal was reached, however, that deal merely set the stage for another round of heated negotiations between Congress and the White House and a new deadline in late February.
Along with the debate over raising the debt ceiling, upcoming weeks could be extremely volatile. However, for today, complacency rules as VIX and VIX ETFs bump along the bottom of a multi-year range.VIX and VIX ETFs tend to move opposite to equity prices and so a low VIX oftentimes means that rising volatility and declining equity prices lie ahead. Most intense action is likely to occur in February and March as the debt ceiling and second fiscal cliff deadline approach.
Volatility Index – New Methodology (VIX): Index: -2.3%
iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX): -2.46%, This ETN is designed to track volatility in the markets as measured by the Chicago Board Options Exchange Market Volatility Index (CBOE Index), a popular measure of the implied volatility of S&P 500 index options.
VelocityShares Daily 2X VIX Short-Term ETN (NYSEARCA:TVIX): -3.07%, This ETN is designed to track 2X return on volatility in the markets as measured by the S&P 500 VIX Short-Term Futures Index.
Velocity Shares Daily Inverse VIX Short-Term ETN (NYSEARCA:XIV): +2.57%, This ETN is designed to inversely track the volatility in the markets as measured by the S&P 500 VIX Short-Term Futures Index.