Saqib Ahmed Iqbal

NEW YORK (Reuters) – Options traders are showing little fear that U.S stocks will turn volatile in coming weeks, even as the Federal Reserve appears set to announce an unwind of the easy money policies that helped equities double from last year’s lows.

The Cboe Volatility Index, known as Wall Street’s fear gauge, recently stood at 15.52 after closing at a post-pandemic low of 15.01 on Thursday.

After closing at record levels, Friday’s close was 0.2% lower. Although many investors are concerned about how stock markets will respond to the Fed’s $120 billion monthly bond purchase taper, so far the sanguine options trading suggests that participants in the market aren’t rushing to get insurance against volatility in the coming weeks.

Fed suggested that it would likely announce a taper after its next policy meeting, Nov 3.

Chris Murphy, Susquehanna International Group equity derivative strategist said that it demonstrates investors feeling more at ease with the Fed.

Murphy stated that the Fed did a great job of telegraphing their movements, making everybody feel comfortable about what was going to happen.

However, that doesn’t mean things won’t change. Investors will be able to get additional information about the Fed’s plans for withdrawing monetary support and raising rates eventually.

After Fed Chairman Jerome Powell stated that the U.S. central banking is on track to reduce its asset purchases and that inflation will decline next year, he noted that COVID pressures are expected to fade.

The VIX futures that expire within the next months were slower to fall relative to spot VIX. Analysts stated this indicates a bit of anxiety over how stocks will perform during these months.