CBOE's Rhoads On How Low VIX Can Go

August 04, 2017

Russell RhoadsRussell Rhoads, CFA, is director of education for the CBOE Options Institute, which is part of CBOE Holdings, the parent company of ETF.com. He is the author of six market-related books and an adjunct instructor at Loyola University and the University of Illinois, Chicago.


ETF.com recently caught up with Rhoads to discuss the lack of volatility in the stock market and the record-low VIX, an index that measures implied volatility on S&P 500 options (also known as Wall Street's "fear gauge").

ETF.com: We’ve heard a lot about how low the CBOE Volatility Index (VIX) and volatility are, but could you put that in perspective? How rare is the period we’re going through right now?

Russell Rhoads: We're as low as we’ve been for the whole history we’ve had VIX, but the other rarity is how low the actual market volatility has been. This is the least volatile the market has been since the ’60s.

ETF.com: Why do you think the volatility is so low in the stock market?          

Rhoads: It's really perplexing. Part of me thinks there’s nowhere else for people to put money. You’d almost rather put money into a stock that pays a dividend than buy a bond right now for income.
Part of me also wonders if the huge flows into ETFs, which have been being distributed across a whole lot of names, have had something to do with the lack of market volatility as well.

Instead of it being a market of individual stocks, it’s more like the stock market is a single asset class that people are just putting money into. If that money gets spread out evenly, you’re just going to see a grinding higher in the stock market, with not a whole lot of realized volatility.

ETF.com: What’s even more surprising to me is that the stock market is unfazed by all this tumultuous news coming out of Washington, D.C., with the Trump administration and Congress. Does that surprise you?

Rhoads: It really does. Although, one of the early lessons in my career that’s turned out very well is that when the market sells off based on something the government is doing, it’s almost always a buying opportunity.

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