economy
Wall Street's 'fear gauge' is doing something unusual as stocks hit record highs
Stocks and the Cboe Volatility Index move together only about 20% of the time.
TL;DR
- The VIX, the stock market's 'fear gauge,' is moving with the S&P 500's rally, an uncommon occurrence.
- Record call option buying, particularly for the S&P 500, is driving up option prices and implied volatility, causing the VIX to rise with stocks.
- This scenario can lead to a double-whammy for call option buyers if both the underlying asset price and volatility fall.
- The current environment creates potential win-win scenarios for investors worried about market swings, as hedges could work alongside stocks.
- The put-to-call ratio on Tuesday reached its second-lowest reading on record at 0.83.