As short-term volatility slides, the VIX is falling back in line with VIX future premiums, a reflection that demand for short-term disaster protection roughly matches demand for longer-term insurance.
Futures on the CBOE's Volatility Index are "flattening" as the VIX falls 1.7% to 31.08. This means that "fear" about the next 30 days is roughly in line with "fear" about each month through May.
Typically, "long-term fear outweighs fear over the next 30 days," says OptionsPit's Mark Sebastian . In an unusual move earlier this month, S&P's US credit downgrade pushed the VIX to48, well above its futures readings, meaning investors bid up the price of short-term options protection relative to longer- dated protection.
By Mark Gongloff
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