Wall Street's 'fear gauge' is doing something unusual as stocks hit record highs
📰 source: cnbc_topnews · 📊 technical
the cboe volatility index (vix) rose a full point on tuesday even as the s&p 500 gained 1.8% to a record high. on wednesday, vix moved higher again while stocks extended gains, then fell as the market reversed. this happens about 20% of the time, typically when vix is low and heavy call buying pushes volatility up alongside equities.
more than 4 million s&p 500 index calls traded on cboe tuesday, an all-time record. at nasdaq, the price of calls betting on a one-standard deviation move in the nasdaq 100 jumped 42% — the biggest single-day rise in five years. the put-to-call ratio fell to 0.83, the second lowest reading on record.
for bulls, far out-of-the-money calls look expensive after such a surge in implied volatility — a drop in both the underlying and volatility can hurt them. for investors who want protection without selling, the setup is more balanced: vix sits near long-term averages, so hedges could work in both scenarios, rising with stocks on exuberant days or spiking if the market falls.
why it matters: record call buying is breaking the vix's usual inverse link to stocks, making options expensive for bulls while opening hedge opportunities.
source: cnbc_topnews
sentiment: +0.00 · impact: 0.30