The VIX has been a topic of much greater interest in recent weeks as it flirts with (and even briefly dips into) single digits. Realized volatility is on a record streak with a record 45 consecutive trading sessions without a 1% intraday move:
In addition, we are on a 90 trading session streak in the S&P without a 1% decline. This is the longest streak in more than a decade.
But perhaps most importantly institutional investors (pension funds, mutual funds, etc.) are exhibiting an enormous amount of complacency. Typically long only investors will hold some amount of long exposure in VIX futures in order to hedge against a spike in volatility. No longer! As of the most recent Commitments of Traders Report institutional investors have a 0% net length in VIX futures:
The last time institutional investors had anywhere near this little net long exposure to VIX futures was late-2015, just before we saw a huge spike in volatility in January of 2016. Meanwhile, futures speculators are net short VIX futures against a net long position by hedge funds and dealers (more than 120,000 contracts net short by non-commercial specs vs. a more than 120,000 contract net long by commercials), which equates to a roughly $1.5 billion 'smart money' vs. 'dumb money' trading confrontation. The 'smart money' is long the VIX and complacency is through the roof.
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