As trading winds down for the week, U.S. equity indexes are at another record high while bond yields remain stable. In late trading the CBOE Volatility Index (VIX) has fallen below 11.00 for the first time since February 2007. Volatility has apparently decided to move on after seven years, having outgrown its stale partnership with fear that so well framed the financial crisis and the Eurozone debt crisis it spawned.
Naturally, we keep hearing people advise that protection is cheap and worth buying at such low levels. And they may yet be proved right. But as the week comes to a close with another monetary easing from the ECB out of the way and a recovery to pre-recession peaks for U.S. payrolls, demand for protective options is slipping away. The VIX traded as low as 10.92 in the final hour of trading on Friday.
Chart shows CBOE Volatility index breaks two-year low to trade at lowest since February 2007.