The VIX index is likely to fall in the next month

●The VIX index is likely to fall in the next month

[VIX Jisoo’s present vs spot]

1. The VIX index futures traded at a high of 25.20 and a close of 23.97 the previous day, but around 21.7 the same day. (VIX: Cboe Volatility Index, a volatility index produced by the Chicago Board of Options Exchange, quantifies the volatility of the S&P 500 options that market participants expect over the next 30 days.)
2. The expiration date of the VIX futures is the third Wednesday of each month. Because the VIX bets on future volatility, a drop in the price of the VIX futures on the expiration date means that the bad news is likely to be resolved within 30 days.
3. The VIX index historically moves between 15 and 20 on a normal basis, splashes above 30 in the fear phase and then returns to the average.
4. A case in which the VIX futures were significantly lowered on the expiration date of the VIX futures and the spot was also missing after the COVID shock. On February 18, 2020, the VIX index was completely calm at 15 levels, but surged to 82 on March 16. At the time of COVID-19, the VIX futures curve was in a “constant backwardation” state between Feb. 24 and May 6, meaning that the VIX spot > short-term VIX futures > long-term VIX futures structure continued. Eventually, as spot prices converged with futures prices, volatility was reduced and the market rebounded.
5. Conversely, during the financial crisis, the VIX futures curve was backwatershed from October 16 to December 10, 2008, during which high VIX persisted and futures eventually soared.
6. In the end, if not system risk, most of the cases where VIX futures have historically been significantly lower at maturity have led to low convergence in spot.

[Call]
I would like to express the current market adjustment as a volatile market because I think the impact of supply and demand and psychological adjustments is greater than the structural downside factors. Therefore, analyzing the VIX futures curve is likely to reduce market volatility over the next month. There is also a decision on the FOMC’s benchmark interest rate within a month, and it should be seen that the issue of freezing interest rates will not be a factor that increases market volatility structurally. In the event of signs of shrinking volatility, historically, the fall and the rebound of major stocks were strong in the early stages of the market rebound. In the future, we need to keep a good track of the stocks that lead the market rebound by organizing daily gains.