Low volatility is a myth, and that's good news

Trader on the floor of the New York Stock Exchange, May 21, 2014.
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Investor wariness of stock market volatility may only appear to be low.

Traditional measures of market complacency show it at levels rarely seen since before the financial crisis—and headed toward historic troughs. Most notably, the CBOE Volatility Index has been on a consistent downtrend throughout 2014, despite an unexpectedly weak economy in the first part of the year and almost daily geopolitical disruptions.

Forget standard volatility though, for a minute.

Looking at implied volatility rather than historic volatility gives a different picture of market expectations. (Historical volatility measures daily price movements while implied volatility looks at expected price changes.)

Options traders are expecting implied volatility to rise on many of the stocks in the blue-chip Dow Jones Industrial Average.