Traders are looking for fear, and not finding it...at least not in stocks. Yesterday, the Volatility Index (VIX), a measure of the intensity of buying in near-term put and call options on the S&P 500, dropped 14 percent--a rather rare event.
Today, with the ten-year yield over 2.9 percent, I thought surely we would see a little concern that traders might bid up put options.
Not so.The VIX has been down most of the trading day Thursday. At 13 and change, is not far from the lows for the year.
Because the VIX measures trader expectations for volatility out only 30 days, you might expect it to be low, because we are in a holiday period and stocks are likely to be volatile for the next few weeks.
That's true, but there's not even any fear when you look far into 2014. Right across the curve--as far out as you can see--January, February, March, all the way into July of next year---VIX future contracts are lower than they were a week ago. They are also notably lower than they were a month ago.
Here's the VIX by the numbers:
For those of you who don't watch the VIX much, these are very low numbers. With a few exceptions, the VIX has been below 18 for the last couple years...the few times this year it approached 20 (in June and October) proved to be terrific buying opportunities.
But we are nowhere near such spikes. What, then, accounts for the lack of fear?
We just took out a good part of the macro risk for stocks, with the modest Federal Reserve taper, the dovish statement, and the budget deal. There is less need for a large amount of macro protection. Not forever, of course.
For the moment, however, traders can go back to playing the game of which stocks to short, and which to go long.
—By CNBC's Bob Pisani