Are Option Prices Still Expensive?
The VIX broke through the 19 level today, meaning pricing for puts and calls have reached their lowest levels in 16 months. But that doesn't make them cheap.
While many refer to the VIX as the so-called fear index, as we've pointed out time and again on the show, the VIX is more of a movement index: the more the market moves, the more the VIX tends to bounce around.
The VIX is currently pricing in average daily market moves of just under 1% per day, far greater than the market has actually moved in the past 20 days, which works out to about just over a half-a percent a day.
That disparity could mean the VIX could go even lower, as options prices catch up to a less volatile market.
"VIX is likely to fall another 10%, and when that happens, I might want to look at buying call options," said Brian Stutland of Stutland Equities.
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