Word: vix
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Since stocks are pushing higher, the VIX has obviously come down partially as a result of an easing of fear among investors. But these investors have not forgotten their fear, and it could easily escalate...
Traders writing (i.e., selling) put options are, therefore, the insurers. But why should their opinions affect the most (mis)quoted measure of volatility, the VIX? Many justify using options pricing because options traders are supposedly more sophisticated investors; options are considered more complex than their underlying stocks. But these are the same "sophisticated" investors who suffered enormous losses over mortgage-based securities. Can we really trust an index derived from their (mis)pricings...
Before the crash, from 2003 to 2007, the VIX was well below its historical average, chilling in the 10 to 15 range. In hindsight, insurers charged dangerously low premiums against catastrophe. Let's hope we're not heading there again...
...options prices have fallen either because there is less demand for them, or perhaps due to oversupply as the market has been saturated by financial firms wishing to sell these options. The VIX may have continued its descent because investors do not fear a market crash enough to buy insurance at the same premium. Or perhaps more banks are writing options - selling insurance on a possible market crash...
Bottom line: the price of insurance is not a great predictor. So enjoy the improved stock-market performance but don't put too much faith in the market's next moves just because the VIX is saying all is well...