According to the umbrella institution for world’s central banks, the persistently low levels of the CBOE VIX index can be attributed to investors flocking towards yield-enhanced exchange-traded funds. The VIX index, provided by the CBOE, is widely used as an indicator of market anxiety. It is derived from the price of one-month options on the S&P 500 index, reflecting the demand for protective measures during periods of market turbulence. As traders seek the security offered by options, their prices surge, consequently causing an increase in the VIX.

According to the Bank for International Settlements' quarterly report, the recent low VIX is unlikely to be attributed to retail traders' preference for purchasing short-term options. Instead, it is suggested that the popularity of structured products, which offer investors higher returns through the sale of options, is the main cause.

Investors are granted the privilege, without any obligation, to purchase an underlying asset at a specific price or sell it at a predetermined price within a specified timeframe through the use of options.

However, as BIS analysts Karamfil Todorov and Grigory Vilkov wrote in their BIS note, “The compression of equity market volatility throughout most of 2023 seems puzzling. Despite the prevailing uncertainty stemming from interest rate paths and geopolitical tensions, the VIX remained below its long-term average of around 20 for most of 2023.” We can add, that everything can drastically change when investors realize that the Fed isn’t going to cut interest rates anytime soon. So, as a popular movie’s robotic character said, “prepare to enjoy your joyride!”