I remember the summer of 1998 when crude oil was putting in new lows almost daily. At one point it went below $12 a barrel, which is roughly what it cost at the time to pull it out of the ground. Think about that for a minute: for a brief time oil was worth more right where it was beneath the Saudi sand than it was in the tank of your car. I remember going over Unleaded Gas charts with clients and telling them, "You see where the lowest point gas has been in the history of trading on the chart? Yeah, take your pen and make a mark on your desk about two inches below the sheet of paper, cuz that's where it's trading right now."
It's easy to look back on that time and say, "Well, duh. Of course you should've been buying. How much lower could it go?" and you'd be right. (just for your reference, gas at the pump was as low as $.70 a gallon in some places) But I can tell you that it wasn't an easy sale for a lot of people. It was just so low that many clients, some pretty sophisticated, wanted nothing to do with it. Fortunately I built a huge position and it began the roll that led to my retirement a year later.
I'm starting to wonder if we're not seeing a similar opportunity in today's VIX. The VIX has been stupid low for the past couple years. Even after yesterday's 14% jump, the VIX remains below its 50 and 200 day moving averages. With the market putting in 6-year highs and rallying more than 5% YTD, I wonder if everyone has been lulled into a false sense of security and is about to lose a big chunk of their ass to the bite of the VIX.