The VIX fell below 14 at one point Thursday for the first time since May. Wall Street’s so-called fear gauge has been in the spotlight this week after Citigroup’s equity trading chief said the VIX is flawed.
“A big mistake the market makes is looking at the VIX as an indicator of stock market risk. Why? Because it’s an asset class and it’s more traded for yield than protection,” said Mike Pringle, global head of equity trading at Citi, in a Reuters report.
“The growth of structured products around VIX drove that move. In most cases, the VIX is sold to generate yield but during some stress periods, the weakness in the spot level triggers significant computer-generated technical buying from these products,” he said.
iPath S&P 500 VIX Short-Term Futures ETN
