Exchange traded products designed to mimic futures contracts based on the CBOE Volatility Index pulled back sharply on Tuesday following a move higher earlier this month.

The VIX, Wall Street’s “fear index,” fell below its long-term average of 20 on Tuesday ahead of a key confidence vote in Greece and the Federal Reserve meeting.

Exchange traded funds and notes that follow VIX futures weakened as well. VelocityShares Daily 2X VIX Short-Term ETN (NYSEArca: TVIX) fell 9%.

However, one analyst says that digging deeper into options markets and looking at implied volatility in some sector ETFs shows market fear and risk may be higher than the VIX currently suggests. [VIX ETFs Soar]

Nicholas Colas, chief market strategist at ConvergEx, said there has been a “dramatic” pickup in implied volatility in high-yield bonds, healthcare, investment-grade bonds, financials and consumer discretionary stocks.

Over the past month, the VIX “may not have been much on the move but there are plenty of other asset classes and some industry sectors where the fear factor is clearly on the rise,” he wrote in a June 17 note.

Meanwhile, gold and silver ETFs have experienced a dip in implied volatility, which suggests that investors view holding precious metals as a safer bet.

The data “seems to show that options markets aren’t quite so lackadaisical as the VIX and its leisurely trek through 20 seems to imply,” Colas said. “Risk pricing in the options market is getting reset higher, but that process isn’t obvious to someone just watching a single indicator — the VIX.”

ProShares VIX Short-Term Futures ETF (NYSEArca: VIXY)

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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