The recent tech selloff, primarily driven by concerns surrounding DeepSeek, has led to a significant increase in stock market volatility, as reflected by the VIX's sharp rise. Despite this spike, the VIX futures curve remains relatively stable, indicating that while there is immediate market uncertainty, investors are still confident in the market's long-term stability. This divergence between the VIX spot and futures is typical during periods of heightened risk, reflecting short-term fears but a belief in eventual market stabilization. The current increase in the VIX may be more indicative of liquidity issues and wider bid-offer spreads on S&P 500 options rather than a full-blown panic, drawing parallels to the late 90s dotcom bubble.
The ProShares Short VIX Short Term Futures ETF (SVXY) experienced a notable decline, dropping 5.72% to $49.13 at 9:00 AM on Monday, January 27.