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What do Volatility Metrics Indicate about the S&P 500 after last week's global stock sell-off

Oct 15, 2018

  • Last week, a sell-off in global stocks caused the VIX volatility index, which tracks the 1-month implied volatility of the S&P 500, to spike to 24.98 on October 11th, 2018 -- the highest VIX level seen since touching 37.32 on February 5th, 2018. The VIX's 3-year average currently sits at 14.16. 
  • During this period, the VVIX, which tracks the 1-month implied volatility curve of the VIX volatility index, also spiked, hitting 135.61 on October 10th, 2018 -- the highest level seen in the VVIX since reaching 180.61 on February 8th, 2018. 
  • The SKEW index, which tracks put buying activity of the S&P 500, dropped to 127.65 on October 10th, 2018 -- this indicates that, despite volatility increasing, the relative purchase of puts has been muted, suggesting there has not been a rush by investors to "hedge". 
  • Spikes in volatility paired with declining SKEW levels suggest that the recent drop in SKEW is transitory and there may be an opportunity for smart investors to discover attractive stocks at discount prices.

Source: Bloomberg

Source: Bloomberg