A Subtle Turn in Implied Volatility as Realized Volatility Craters

Since the post-BREXIT volatility spike (which lasted for two trading sessions) a funny thing has happened, volatility has completely collapsed. The Russell 2000 is on streak of 13 trading sessions within a ~2% trading range with several trading sessions seeing less than a 1% daily range:


IWM (Daily) with realized volatility (above) and implied volatility (below)


While realized volatility (as measured by rolling 7-day average true range) has made fresh lows, implied volatility appears to have bottomed and slowly begun turning higher. Could this presage a breakdown from the current narrow trading range?

Only time will tell but one thing is for certain, we have been witnessing an exceptional streak of low volatility for equities; according to Ryan Detrick the S&P 500 has traded in a range of 0.92% for the past 11 days, which is the tightest range going back to at least 1970.


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