Jim Carroll says the VIX is not broken. It is being muffled. As markets have swung hard and felt chaotic, the volatility gauge has stayed in the high teens, and Carroll says that is because traders are no longer relying as much on broad 30-day protection.
He made the case in a discussion with Dave Nadig at Basis Northwest, arguing that the shift toward short-dated and zero-day-to-expiration trading has changed what the VIX can see. Traders can now surgically target a specific event, like a Fed announcement or CPI print, rather than buying broad 30-day protection. That means a lot of hedging activity never reaches the measure in the same way it once did.
The result is a market that can look calm on one screen and restless on another. Carroll said market makers are largely sitting in long-gamma positions, which mechanically pushes them to sell into rallies and buy into dips. That can soften swings and keep the VIX compressed even when the tape is noisy. He said the compression shows up in Bollinger Bands, Keltner Channels and average true ranges, all of which can stay tight for longer than investors expect.
That quieter read is not just about dealer hedging. Carroll said income-focused ETFs, including covered call strategies, buffered products and defined-outcome funds, have added a structural layer to the market. Those products sell options at scale, reinforcing the same pressure that can dull volatility. In that sense, the VIX can be telling the truth and still miss part of the story. It captures one slice of anxiety, but not all of the trading that now expresses it.
Carroll also pointed to the market-makers that keep liquidity flowing only while it makes economic sense. Firms such as Citadel and Susquehanna, he said, can step back with no announcement and no warning. That is the part traders have to live with: the calm can persist longer than they think, then vanish faster than they expect. For now, Carroll’s view is simple. Watch price action, follow the breadcrumbs, and never mistake the calm for permanence.
The question is not whether the VIX has failed. It is how much of today’s anxiety is being pushed into places the gauge no longer measures well, and how long this compression can hold before those hidden pressures surface again.
Thunderbirds Netball surge to top as Adelaide down Vixens 61-42
