Mosaic Finance
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VIX spot vs VIX3M — contango/backwardation regime
Spot volatility vs 3-month forward · When VIX > VIX3M = backwardation (panic)
VIX= 30-day implied volatility from S&P 500 options. VIX3M = 3-month implied volatility.
Contango (ratio < 1): Normal state — longer-term vol expectations exceed near-term. Markets calm.
Backwardation (ratio > 1): Inverted — near-term fear exceeds long-term. This is a capitulation signal; historically, markets tend to recover within weeks of inversion.
The VIX measures how much volatility the market expects over the next 30 days, while VIX3M looks 3 months out. Normally, longer-term uncertainty is higher (contango). When short-term fear spikes above long-term expectations (backwardation), it usually signals peak panic in the market -- and historically, that has been a contrarian buying opportunity. Think of it as a "fear gauge" that tells you whether investors are panicking right now or calm.