The extreme move higher in vol has continued today. Sure, the market has traded down sharply today, but not in a panic mode the volatility space is pricing. As we have said so many times before, buy volatility (protection) when you can, not when you must.
Chasing protection here looks like a rather late trade. Remember, markets can continue lower, but unless they crash lower, vols are trading rather rich here.
Belo chart shows the SPX implied vol (blue) versus the 30-day traded vol (orange). You can clearly see the extreme move in implied volatility. There is of course a lag in the 30-day volatility, but pricing some 1.4% daily moves for the SPX looks a bit rich.
The below chart showing the same but for the European SX5E index. Everywhere we look, protection looks rather expensive, that is of course if you don´t need the “crash crash” protection.
Source, charts by Bloomberg