Stocks Drop as Volatility Spikes

The video discusses the current state of market volatility, focusing on the VIX futures spread and its implications. It highlights the abnormal market conditions, with a focus on the backwardation of the VIX curve, indicating heightened short-term risks. The discussion includes an analysis of how these conditions have deviated from the norm and what this means for traders and the market's future behavior.

What does a typical upward sloping VIX futures spread indicate?

• Market instability

• Contango

• Backwardation

• Immediate risk

During a market sell-off, what happens to the VIX futures spread?

• It stabilizes

• It narrows

• It blows out

• It disappears

How long can episodes of complete backwardation in the VIX curve last?

• Indefinitely

• A few days

• Up to a month

• Several months

What does it mean when the front month VIX futures contract is trading at a premium?

• Stocks are drifting higher

• Traders are concerned about immediate risks

• The market is in contango

• Traders expect lower risk

In a normal market, how does the spread between VIX futures contracts behave?

• It disappears completely

• It is highly volatile

• It is stable and stocks drift higher

• It narrows significantly