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Don't Buy VIX Until You See This Data: Trader

The Chicago Board Options Exchange's Volatility Index (VIX), widely considered the best gauge of fear in the market, is currently sitting at a 16-month low. Is this an all-clear signal for investors or a warning sign? Brian Stutland, president and trader of Stutland Equities, shared his insight.

“The move that the VIX has made over the last few days is very typical for January,” Stutland told CNBC.

“This move lower in the VIX is a healthy sign that the market is rallying in the month of January. Until we see some deterioration in the credit and bond markets and until we see a change in trend in the VIX, I think it’s safe to continue to invest in this marketplace.”

Stutland said some traders are betting on an increase in the VIX, but cautioned investors who are looking to buy volatility.

“If you look at VIX futures out to March, they are trading at extreme premium: 25 percent over where the VIX is actually trading at right now,” he said.

“If we get a decent number in the jobs report, the VIX comes down pretty strong and trades into the mid-teens."

"So I’d be cautious to buy volatility right now," he said. "I would wait for the jobs numbers to come out if you’re going to use VIX as a hedge in your portfolio.”

  • Watch Stutland's Previous Appearance on CNBC (Dec. 28, 2009)

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Disclosures:

No immediate information was available for Stutland or his firm.

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