The chart shows the Vix over a one-month period up to Monday 24 August with the last three sessions seeing the volatility rate almost treble. The Vix gauges investor fear by measuring the prices of near-term options on the S&P 500. The measure has even spawned a number of exchange traded funds based on buying derivatives associated with the index, as traders are increasingly trying to harness periods of volatility through various investment instruments in an effort to find outperformance.
Vix blows up
Many market watchers have suggested that such a surge in the Vix - it is at levels not seen since the dark days of the financial crisis in 2009 - could actually be a buying signal. Indeed, as Simon Thompson points out in his column this week, since 1990 the Vix has only doubled once before in the space of three trading sessions - in August 2011 - and within a month the blue-chip S&P 500 was up almost 6 per cent, and within three months was 12 per cent ahead. Over the past three years, spikes in the Vix have been followed by a steady recovery in the S&P 500, but the severity of the latest spike is beyond anything seen in recent times, which clouds the outlook somewhat.
