U.S. equity volatility rose the most in almost four months last week after unexpectedly slow growth in China and a selloff in commodities triggered the biggest stock-market drop since November.
The Chicago Board Options Exchange Volatility Index climbed 24% to 14.97, the most since December. The index known as the VIX surged 46% in four days, briefly erasing its year-to-date decline, before sliding 15% on the last day of the week. The Standard & Poor’s 500 Index, which moves in the opposite direction as the VIX about 80% of the time, slid 2.1% to 1,555.25 for the week.
Stock swings are increasing after the largest slump in gold futures in more than three decades, weaker corporate earnings and data from U.S. retail sales to Chinese manufacturing that trailed economists’ forecasts. Shares outstanding in the most popular exchange-traded funds linked to the VIX have reached all-time highs this month as investors seek to hedge losses in stocks.
“Volatility is getting more sticky, it rushes up without going straight back down which we haven’t seen before this year,” Michael Purves, Greenwich, Connecticut-based Weeden & Co.’s head of derivatives research, said in a phone interview on April 19. “The markets are starting to process that the economic news has been getting softer and that we’re due for a correction. We obviously also had the extraordinary move in gold which has been enhancing volatility across asset classes.”
The VIX rose 3.2% to 15.45 at 9:49 a.m. in New York today. The S&P 500 has lost 2.4% after reaching an all- time high on April 11. Since 2010, the U.S. equity benchmark has dropped an average 5.2% in the second quarter after rising in the first.
U.S. stock-market volatility has risen this month as investors speculate how much longer the bull market that began in 2009 will continue. The average gain or loss for the S&P 500 doubled to 0.84% from the first quarter and is higher than 2012’s 0.59%, data compiled by Bloomberg show.
Options traders have been increasing bets that volatility would increase. Shares outstanding for the iPath S&P 500 VIX Short-Term Futures ETN climbed to an all-time high of 68.8 million on April 15, data compiled by Bloomberg show. The figure for the ProShares Ultra VIX Short-Term Futures reached a record 54.6 million shares on April 11. The two had the highest volume in the past 30 days among volatility-related securities.