It’s been a good year to bet on volatility.
The CBOE Volatility Index, or VIX, is up nearly 60% this year and counting as President Trump and his cronies rattle the world order by launching missiles at Iran, and the market’s continued confusion over whether the Administration’s tariff policy is legal.
The VIX, known as the market’s anxiety gauge, rises in times of turmoil and falls when things are calm. It measures the market’s expected volatility over the next 30 days, and tends to rise when the broader market falls. The VIX is calculated based on the price of options on the S&P 500, so when investors expect bigger swings in stock prices, the price of options rises and the VIX goes up.
While the VIX has been a less-than-reliable gauge of volatility lately, when it rises so sharply, and in such a short period of time, it’s worth paying attention.
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Investors watch for when the index cracks 30, an indication that things are, well, volatile. The last time it eclipsed that was in April of last year, when President Trump liberated America by instituting sweeping tariffs that have since been struck down by the Supreme Court.
With President Trump’s recent comments that the federal government really does not have a second-day plan for the war, the market will continue to be topsy-turvy. “I guess the worst case would be we do this, and somebody takes over who’s as bad as the previous person, right?”
That’s the kind of rhetoric VIX traders love to hear. As the Iran War drags, and global energy supply chains shutter, expect the VIX to keep creeping up.
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