Everything went higher today (despite the data during the last minutes into the close); stocks, bonds and fear; a somewhat unique combination of ups. When noticing today’s relatively rare direct correlation between equity market volatility (aka VIX), equity indices and “safe haven” US government bonds, option market veteran David Robbins of WallachBeth Capital says, “The wall of worry is simply growing taller.”
With the benchmark barometers DJIA and SPX continuing to climb past technical and psychological barriers, and now only single digit percentage points away from all time market highs despite the still-fragile (albeit somewhat improving state of the US economy), “its always worth worrying” said Robbins, perhaps explaining the subliminal spikes noticed in outer-month VIX options, and in particular, put options.
Added Robbins, “The skew is always a good clue, and if you look at April and June VIX or VXX options, its clear that market pros are re-framing; the risk of a market pull back increases each week the equities market goes up. There’s always a black swan out there flapping its wings, but its simply more expensive today to hedge that risk than it was last week.