Nothing To Fear, But Fear Itself

The stock market had a banner day today, despite the fact that General Motors- one of America's most storied corporate icons - officially filed for Bankruptcy.

A couple key positive economic data points and it was off to the races.

But a curious thing happened on the way to Market Nirvana - the VIX actually rose. Usually on such up-days, the Volatility index tends to drop, as fear seeps out of the market. But today, despite the stock euphoria, the VIX actually rose, and according to one member of our show, it was again driven by fear, but this time of a different sort: the fear of missing the rally.

According to Brian Stutland, "Options Action" star, and as President of Stutland Equities, a "VIX Merchant Extraordinaire," the gains in the VIX today were driven by options traders who were buying out-of-the-money calls in the hopes of catching-up to this massive rally.

"The VIX has maintained upward pressure due to the significant call buying today in which traders are beginning to fear they are missing the rally and need leverage to get into the game. Because call buying in the S&P 500 equates to premium buying of options, the price of the VIX remains elevated as it reads the price of premiums people are willing to pay on the next 30-days worth of options in the S&P 500 index," said Stutland.

In the end, much like cholesterol, I suppose there is good fear and bad fear.

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    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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