VXO (S&P 100 options implied volatility) aka. "original VIX"
Skynet's preferred method of levitating the market by crushing volatility, is losing its efficacy due to ever-increasing realized/actual/historical volatility. The chasmic breadth divergence is feeding back into market options pricing. The market will hit the next air pocket at the same time that hedging becomes binary impossible...
The red line is 50 day historical volatility versus 3-month implied volatility futures (blue). The short (implied) volatility trade has stopped working because actual volatility is rising in lockstep with implied volatility via the Black-Scholes options mis-pricing model which prices options based upon past volatility...
Both actual and implied (options) volatility are trending. Hedging is become ever-more expensive on the way to becoming impossible
Which explains this colossal divergence...
Inverted VIX with S&P: In a bear market volatility rises...
This is why volatility is rising...
Fewer and fewer stocks participating on the upside means that rallies and declines have become ever-more "volatile". This next decline will be one for all ages.
