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VIX Indicates 'Wall of Worry' in Markets: Derivatives Pro

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, dropped below 17 on Monday—the first time since May 2008. Is it a sign that stocks have topped? Dan Deming, trader at Stutland Equities, and Dan Hutchinson, head of derivatives at Meridian Equity Partners, shared their outlooks.

Trading the VIX

“I’m not concerned about the VIX level,” Hutchinson told CNBC.

However, Hutchinson said the VIX and other metrics in the volatility market suggest that there is still a wall of worry in the markets.

“As long as the market continues to rally into earnings, as a lot of people expect it to do, I don’t think the selloff in the VIX is particularly concerning right now,” he said.

  • Check the VIX Now

In the meantime, Deming said the realized volatility level over the last few weeks is much lower than where the VIX is currently trading.

“So apparently, there’s pressure because there’s a gap between realized and implied volatility futures for VIX measures,” he said. “So as long as that gap's there, you'll see...the VIX lower and historical volatility a little higher as we move through the month.”

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No immediate information was available for Deming or Hutchinson.