Volatility Divergence, Sending Us a Message

“Our indicators tell us, we’re very close to a Lehman-like drawdown,” argues Larry McDonald, a former strategist at Société Générale who now runs The Bear Traps report.

Financial Times, February 20, 2020

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Nasdaq Volatility Surge, Divergence from VIX
The Chicago Board Options Exchange NDX Volatility Index rose to 38 on Tuesday, an 8+ points premium to the CBOE VIX Index. That’s the widest spread since 2004. The gap between volatility in large-cap high fliers and the broader index has run the gamut in a matter of months, going from negative to non-existent to a multi-year high. Investors are paying-up for downside protection on NASDAQ high flyers.

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