A note from S&P Dow Jones Indices (S&P DJI) looking at the levels of volatility indicators such as the VIX Index, aka the ‘fear gauge’, shows that the market is “intensely relaxed” as most volatility measures are down, and several to unusually low levels.

The VIX index has not risen above 12 for over a month, according to S&P Dow Jones Indices.

The VIX represents the implied volatility of US equities, derived from option pricing on the S&P 500. It is a measure of the market’s expectation of stock market volatility over the next 30-day period. The index has not risen above 12 for over a month, and most recently closed at 10.75. Although not quite an all-time-low, VIX recorded its lowest closing value in 23 years when it ended 2 June at 9.75.

The CBOE Gold ETF Volatility Index also set an all-time low of 10.16 on 16 June. It measures the market’s expectation of 30-day volatility of gold prices by applying the VIX methodology to options on the SPDR Gold Shares (GLD). Like other indices using the VIX methodology, the CBOE Gold ETF VIX uses options spanning a wide range of strike prices.

The persistently low VIX presented a profitable investment opportunity for those investors who were not volatility sellers as Tim Edwards, senior director, index investment strategy, S&P DJI, explains: “The sustained low volatility environment provided a boon to volatility sellers; the S&P Daily Inverse Short Term VIX Futures index has tripled over the past twelve months. In signs that such outsized returns may be attracting more participants, the VIX futures curve is unusually shallow. Only 5% separates the price of the front future from that of the front-next.”

The consistently depressed VIX has confused many market commentators who see its value as an anomaly considering the backdrop of seemingly heightened political uncertainty surrounding Trump, Brexit and elections in Europe, as well as the looming end to ultra-accommodative monetary policy and increased concerns regarding equity valuations. Many are asking why is the VIX so low and should investors be worried? (See: Is a low VIX the calm before the storm for investors?)

For investors looking to protect their portfolios from rising volatility, VIX-linked exchange-traded products, such as the Boost S&P 500 VIX Short-Term Futures 2.25x Leverage Daily ETP (VIXL), could provide an effective hedge.

The ETP is listed on the London Stock Exchange, Borsa Italiana and Xetra and provides 2.25 times the performance of a daily rolling long position in first and second month VIX futures contracts. This means that if the S&P 500 VIX Short-Term Futures Index ER, its underlying reference, rises by 1% over a day, then the ETP will rise by 2.25%, excluding fees. With annual fees of 0.99%, the ETP is pricey but nonetheless provides investors with a powerful tool.

An alternative to the Boost ETP is the Lyxor S&P 500 VIX Futures Enhanced Roll (Lux) UCITS ETF (LVO), listed on Euronext, Borsa Italiana and Xetra. This Lyxor ETF track the S&P 500 VIX Futures Enhanced Roll Index, a second-generation volatility index that dynamically switches between a short-term VIX futures and a mid-term VIX futures, based on their relative implied volatility, in order to model a cost-efficient exposure to volatility in the broad equity market. With fees of 0.60% is cheaper than the Boost offering, but lacks the leverage factor, making it more expensive on exposure-adjusted basis.

Edwards did note that while volatility measures were subdued across most indicators, the indices did pick up pockets of uncertainty present in the market. He said: “Exceptions to the rule were provided by the British pound, which continues to reflect the political uncertainty generated by the start of the “Brexit” negotiations and the failure of any party to secure a Parliamentary majority in the recent election, and Australian equities – the latter rattled by signs of a downward turn in the property market.”

The CBOE/CME FX GBP Volatility Index closed at 8.64 which represents a one month gain of 1.36 points, although this is still below the 200 day average of 9.62 for the index. The S&P/ASX 200 VIX Index closed at 14.41, a one month gain of 1.93 points, and significantly above the 200 day average of 12.96.