The CBOE Volatility Index, a gauge of market fear, rose above 20 on Monday for the first time in four months. But the broader action in the VIX suggests that traders don't expect the market's current rout to last too much longer.
Though the VIX rose above 20 for the first time since Oct. 9, the move in VIX futures dated to August, September and October has been much more restrained, with some longer-term VIX futures contracts actually falling on the day. This would seem to indicate that while traders are fearful about what the next month or two will bring, they don't see the current decline as the beginning of a more serious meltdown.
"Traders feel the event is happening right now, so they want protection in today's correction. Six months later, things could settle back into a normal market," said Brian Stutland, managing member of the Stutland Volatility Group and a major market maker in VIX futures and options.
This sort of action is typical for recent spikes in the VIX (which measures implied volatility based on the prices of S&P 500 options), but it need not always be the case.