Lack of volumes and lack of volatility is starting to become a “problem” for many. A “normal” level of volatility offers opportunities for investors, feeds the investment banks and brokers, but with the recent volumes and collapse in volatility, most are probably now “praying” for some increased activity. We have seen brokers like Plus 500, CMC markets and other related names profit warn over past months. Part of the reason is lower volatility. The big investment banks are not as vulnerable, but if nothing is moving and turnover is horrendous, the trading desks are not going to be cheerful. Should the trend of fading volumes and lower volatility continue, start looking for appropriate plays.
While VIX and global vol indices have come off quickly, the Eurostoxx 50 vol index, V2X, has collapsed. The index closed lower today again, trading at levels almost not seen in many years. This despite the fact Europe is a mess.
The Eurostoxx 50 index, SX5E, moved in a 0.2% max range today!
VIX has also been imploding, but the index is still rather far away from the “rock bottom” lows we saw last year around the 10 level.
The SPX is trading in a max 0.25% range today.
The question is will investors get frustrated with not being able to trade as “nothing is moving”, eventually leading them into further crowded volatility shorts, that once again blow up? VIX shorts have continued shorting….
Source, charts by Bloomberg
