On Wednesday, the VIX increased 18% and for April, it’s up 30%. But after taking a closer look, the market prices for S&P 500?(SPY) volatility has barely moved, reports Barron’s Brendan Conway.?
Referencing a chart by Susquehanna Financial Group’s Chris Jacobson that he created in March and then updated to reflect today’s activity, it shows that while the VIX is higher,?longer maturities out to September haven’t really moved.?
Chart by Susquehanna’s Jacobson
So what does this mean?
If you’re a bear, you view the market as underrating risks while a bull will see confidence. Looking at recently volatility, it hasn’t been predictive but historically it is.?
Conway cites a?Stanford research paper?supporting this as well as noting a research note by?Jacobson who writes, ?[W]hile yes, the recent turbulence has led to a notable spike in the spot VIX, it has not created a meaningful shift in implied volatility once we move out past the very short-term. It does not appear as if the volatility market has priced in any sort of paradigm shift or new volatility regime, just a near-term blip as the market works through the current uncertainty.?
On Thursday at midday, the VIX is at 17.09, up 3.51%.