As we come to the end of the first quarter of 2017 all the talk about VIX has been how quiet VIX has been. I ran some numbers today and discovered that the high to low range for VIX during the current quarter, using closing prices, is 2.34. This is by far the narrowest quarterly range for VIX on record. The current narrowest quarter occurred in the third quarter of 1995 with a range of 2.68. VIX either needs to close over 13.26 or under 10.24 (or a combination of widening the range by 0.34) to avoid the being the quietest quarter on record.
The average closing for VIX this quarter is running close to 11.60. This is low, but not nearly the lowest quarter. That distinction goes to the fourth quarter of 2006 when VIX averaged 11.03. Of course, in less than a year after the end of 2006 VIX closed over 30.00 and within two years we were in the middle of what is now commonly referred to as the Great Financial Crisis.
The chart below is a good illustration of just how volatile VIX’s history has been. It shows the quarterly high, low, and average closing prices by quarter going back to 1990.
Low periods of volatility have always been followed by high periods and vice versa. The behavior of VIX is cyclical in nature and there is no reason to doubt that this cycle will not repeat itself with headline grabbing levels for VIX and short volatility players who are new to the game may head to the exits. We’ve seen this story before and before we know it we will see the repeat of a higher VIX environment again.