Volatility has been extremely, well, volatile this year.
The Cboe Volatility Index
has seen multiple days with extremely sharp moves so far in 2018, jumps that have resulted in it more than doubling over the past three months.
According to data from the WSJ Market Data Group, the so-called fear index has experienced six sessions this year that saw a jumped of least 20%, along with one day that saw a 20% drop. Notably, volatility more than doubled on Feb. 5, amid the start of a steep selloff in the U.S. stock market spurred by inflation concerns.
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While the second quarter of the year just started, that tally of seven sessions stand as the most one-day 20% moves in a calendar year since 2014, when there were also seven throughout the entire year. Looking solely at the six 20% increases, the total is the most for a calendar year since 2015, when there were also six.
All of the 20% moves occurred during the first quarter of 2018, meaning the first three months of the year will go down as historic from a volatility standpoint. Those six sessions stand as the most for a quarter ever, while the seven 20% moves in either direction also represent a record.
For more mild moves, the VIX has seen 38 sessions thus far this year where it moved at least 5% in a single trading day. Through April 10, thats the most on record, according to the WSJ Market Data Group.
The volatility index has seen 19 sessions where it ended up at least 5% the most through April 10 since 1994 and another 19 where it fell by at least 5%, the most since 2016.
While percentage swings in the VIX have been dramatic, they reflect that the index has been trading at extremely low levels for a long time, meaning smaller point moves show up as larger percentage changes. The current level of 20.32 is almost exactly in line with its long-term average, and it comes after a year when the index was at atypically low levels. Of the 56 lowest closing levels in the history of the Cboe Volatility Index (since 1990), 47 of them occurred in 2017, according to S&P Dow Jones Indices. It also notched two all-time closing lows last year.
The swings in the VIX, which uses S&P 500 options to calculate expectations for volatility over the coming 30 days, comes as investors consider a number of potential headwinds for the equity market, including inflation, the Federal Reserves interest-rate policy, and more protectionist trade policies.
Also, the Feb. 5 volatility spike marked the implosion of the popular short volatility play, in which traders bet volatility would remain subdued. The carnage from volatility spike was blamed for temporarily exacerbating the stock-market selloff and resulted in the closure of a popular exchange-traded note that allowed investors to bet on falling volatility.
Read: Jim Cramer blames a group of complete morons for blowing up the market
The VIX has a slight inverse correlation with the stock market. It is up about 85% thus far this year; the Dow Jones Industrial Average
is down 1.3% over the same period, while the S&P 500
has lost 0.6% and the Nasdaq Composite Index
is up 2.8%.
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