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Fear Is Back as VIX Curve Inverts Again on Big-Tech Tumble

Published 20/03/2018, 02:55 am
Updated 20/03/2018, 04:47 am
© Bloomberg. A trader works in S&P 500 stock index options pit at the Chicago Board Options Exchange (CBOE) in Chicago, Illinois, U.S., on Thursday, Nov. 16, 2017. CBOE's proprietary VIX futures and S&P 500 options businesses continue to be its key growth engines, with a lack of substitutes affording it significant pricing power.

© Bloomberg. A trader works in S&P 500 stock index options pit at the Chicago Board Options Exchange (CBOE) in Chicago, Illinois, U.S., on Thursday, Nov. 16, 2017. CBOE's proprietary VIX futures and S&P 500 options businesses continue to be its key growth engines, with a lack of substitutes affording it significant pricing power.

(Bloomberg) -- Fear is back.

The burgeoning bludgeoning of large-cap U.S. technology stocks on Monday has traders acutely anxious about the near-term outlook for the S&P 500 Index.

The VIX futures curve, whose contracts track the implied volatility of the benchmark U.S. stock index over time, is in backwardation. That is, March’s contract is more expensive than the second-month contract, and so on out to September.

Generally, the VIX futures curve tends to slope upward -- called contango -- a tacit acknowledgment that the outlook for U.S. equities is generally more uncertain over long rather than short time periods. Backwardation in the curve is a telltale signal that the stock market is under stress.

During the market mayhem in early February, the spread between the front- and third-month contract blew out to its lowest level since 2009.

© Bloomberg. A trader works in S&P 500 stock index options pit at the Chicago Board Options Exchange (CBOE) in Chicago, Illinois, U.S., on Thursday, Nov. 16, 2017. CBOE's proprietary VIX futures and S&P 500 options businesses continue to be its key growth engines, with a lack of substitutes affording it significant pricing power.

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