Amy Wu Silverman: VIX index continues to be muted amid geopolitical conflict
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The geopolitical events that have unfolded in the last few days have changed the tail risk possibilities that are in the market, but they are not currently reflected in volatility, said Amy Wu Silverman, head of Derivates Strategy at RBC Capital Markets.
When the Russia-Ukraine conflict started, there were big spikes in the Cboe Volatility Index (VIX) â which tracks how option traders bet on swings in the S&P 500 â to levels of 35.
âWe havenât seen anything of that sort, so far,â she said in a CNBC interview on Wednesday about the current conflict in Israel, pointing out that the volatility index is still sitting below the level of 20.
Small-cap stocks have rallied over the last couple of days, being the best performer out of all indexes over the last week. The Russell 2000 (IWM) small caps are riding five-day win streaks. Major averages (SPY), (DJI), (COMP.IND) are also riding three-day win streaks.
âThese kinds of trades are ones that investors have been hoping works for a long time," she said. "It's something our own strategies called for from a valuation perspective.â
But itâs a little bit too early to tell, she added, since these rallies tend to lose momentum, âso weâll have to see if that continues now. It's also just a question, at this point, of valuation.â
Geopolitical risks could also filter into whether rates will ease, affecting stock trading. 
She also raised the question of whether the market has really seen a bottom in rate-sensitive sectors and if those sectors are the ones investors can have some upside in. 
âYou saw these massive sell-ups last week in your (TLT), in your utilities (XLU), and a lot of consumer areas that would be hit hard as rates go higher,â she said.

But the Magnificent Seven (AAPL), (MSFT), (GOOGL), (AMZN), (TSLA), (NVDA) and (META) will continue to be sanguine by investors, with the exception of Apple Inc. (AAPL), which could be âone outlier where I do think the risk coming out of China has increased put skew.â


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4 Reasons I'm Shorting The VIX Despite Geopolitical Risks
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How the stock market fared after the 2011 debt downgrade