VIX Spikes to Highest Since 2008 in Manic Monday Trading
VIX Futures Spike to Highest Since 2009 in Manic Monday Trading
(Bloomberg) --
The Cboe Volatility Index surged to the highest since 2008 on Monday as a plunge in oil prices frazzled traders already on edge over the coronavirus.
The VIX, which measures the 30-day implied volatility of the S&P 500 based on out-of-the-money options prices, jumped as high as 62, its highest level since December 2008 on an intraday basis.
The VIX was already clocking eye-watering levels last week, as stocks were whipsawed by virus headlines. On Friday, it surpassed 50, a threshold last breached when the complex broke down in February 2018. While those moves may appear extreme, over the past 10 sessions, the S&P 500’s realized volatility is 63.
A short squeeze may have added fuel to last week’s jump in volatility expectations, according to Tallbacken Capital Advisors LLC’s Michael Purves. Net speculative positioning in futures on the VIX still flashed short as of Tuesday, hours after the Fed made its emergency rate cuts, according to the strategist.
“With the aggressive sell off on Thursday and again Friday, that would likely have driven a lot of ‘compelled’ VIX buying on Thursday and Friday if shorts were getting stopped out,” he wrote in a note on Friday.
Traders have also been piling into the biggest short-volatility exchange-traded product, adding $233.5 million over the past six sessions. While inflows into the ProShares Short VIX Short-Term Futures ETF typically reflect bets that calm will break out, they may also be part of a hedging strategy or create-to-lend activity.
Either way, anyone who had bet on market calm this week looks set for a world of pain.
To contact the reporter on this story: Yakob Peterseil in London at ypeterseil@bloomberg.net
To contact the editors responsible for this story: Sam Potter at spotter33@bloomberg.net, Sid Verma, Cecile Gutscher
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