Market on edge: Surging volatility

The VVIX, the VIX of VIX

Put/Call ratio

What This Means:

The current market conditions are indicative of significant panic and uncertainty. Elevated VIX and VVIX levels suggest that traders are bracing for considerable market swings in the short term.

The backwardation in the VIX futures term structure reinforces the expectation that this spike in VOLATILITY is a temporary reaction to current market fears. The VIX is a mean reverting index, meaning it will go lower again (ps: price action is NOT the same as volatility, so while volatility may decline, that is not a garantuee that the price will go up)

What To Do:

1. Manage Risk: It's crucial to reassess your risk exposure. Ensure that your positions are not overly leveraged, as high volatility can lead to rapid and significant losses.
2. De-Risk Where Needed: To avoid margin calls and potential liquidation, consider reducing positions in high-risk assets or leveraging products.
3. Volatility Mean Reversion: Historically, volatility tends to revert to its mean. While the current spike is concerning, it is likely to decrease once the immediate panic subsides.
4. Avoid Panic Selling: Making decisions based on fear can exacerbate losses. Instead, focus on a calculated approach to managing your portfolio.
5. Short-Term Volatility: Be prepared for continued volatility in the very short term. Market conditions are likely to remain turbulent, so stay informed and ready to adjust your strategies as needed.

Conclusion:

In summary, while the current market environment is challenging, it's essential to remain calm and take a strategic approach to managing your investments. Volatility is a natural part of the market cycle, and while it can be unsettling, it also presents opportunities for those who are prepared.