A lower VIX does not necessarily mean uncertainty has disappeared. Recent analysis from FOW featuring insights from OptionMetrics contributor Brett Friedman shows that while the VIX has retreated from recent highs, the volatility risk premium (VRP) remains elevated relative to pre-conflict levels. As Friedman notes: “If implied volatility is basically historical volatility plus an uncertainty factor, when you trade that spread you’re essentially betting on the uncertainty factor.” The research highlights an important distinction between implied and realized volatility, and why today’s relatively low VIX should not automatically be interpreted as a sign of calm.
‘Today’s relatively low Volatility Index should not be mistaken for calm’ – Winhall Risk
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