The CBOE Volatility Index, commonly known as the market's fear gauge, has reached a record low for the year. According to one professional trader, this is welcome news for the stock market.
"The big surprise this week was all the positive news, though it may not seem so initially," Boris Schlossberg of BK Asset Management said Friday on CNBC's "Trading Nation." "The world did not fall apart as the market had expected."
Included in that positive news were resolutions in Greece and Iran, calming concerns about the state of oil and global markets. To top it off, companies such as Google and Netflix kicked off the second-quarter earnings season with better-than-expected results.
"We seem to have this aura of calmness," Schlossberg said. "It's very likely stock gains are going to continue, and the VIX is going to continue to go down."
The VIX dropped 29 percent over the week to 12.04 on Friday, the lowest level since December 2014. The fear index, which measures implied volatility based on options and signals investor uncertainty, reached its peak in October 2008 at 89.53.
The VIX is based on the price of options on the . The greater the size of the moves traders foresee, the more they tend to pay for options, and the higher the VIX will rise. And since S&P 500 options are most commonly used to get downside protection against long positions on stocks, the VIX is generally a measure of market fear.
But while the VIX has stayed low this year, Schlossberg warned that when change comes, it can come very quickly—meaning that now may be the time to purchase protection in the form of options.
"We still have the Dr. Feelgood vibe in the marketplace, but of course, any new risk on the horizon could bring us right back to a rise in the VIX," he said. "You buy straw hats in winter and now is a good time to buy protection."
However, Stacey Gilbert of Susquehanna International Group said the lower VIX isn't anything to get excited about.
"The market is just suggesting that some of the market risk has been taken out, but that's also being reflected in the actual price of the underlying index," Gilbert said Friday. "This is pretty much in line to what you would expect."
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