VIX Remains Relatively Muted Despite Significant S&P 500 Sell-off
Despite the S&P 500 experiencing its worst weekly performance since June, the Cboe Volatility Index (VIX) showed an unexpectedly calm reaction. While the VIX hit intraday highs, it closed at 19.4, a move analysts describe as muted compared to historical sell-off patterns. Data suggests that traders are being highly selective with hedges, particularly regarding out-of-the-money S&P 500 and Nasdaq 100 put options. Experts suggest this lack of volatility spike is driven by massive de-leveraging among long/short active managers rather than a lack of fear. Instead of using expensive options to hedge their positions, asset managers appear to be selling stocks directly to reduce exposure. Morgan Stanley data indicates that global gross equity exposure for these managers has dropped 8% from its peak, marking the largest drawdown in at least a decade.
Topics: Nasdaq 100 Options Market S&P 500 Stock Selloff VIX