Days of Market Vertigo Giving VIX Calls Air of Prescience
It?s the consensus view of options analysts that day-to-day turbulence in the U.S. stock market will increase this year after falling since 2011. So far, nothing?s happened to prove them wrong.
Deutsche Bank AG became at least the third major bank telling equity derivatives clients to prepare for more frequent bouts of volatility as the bull market in the Standard & Poor?s 500 Index approaches its seventh year. Already, daily swings in the S&P 500 have widened more than 50 percent in the past month from last year?s average through Dec. 5, Bloomberg data show.
Stocks plunged yesterday, with the S&P 500 dropping 1.8 percent to 2,020.58 and the Chicago Board Options Exchange Volatility Index increasing for the fifth time in six days. Declines spurred by tumbling oil and concerns Greece will exit the euro have sent American equities to the biggest decline to start a year since 2005, data compiled by Bloomberg show.
?This was a pretty ugly day and certainly not a good start,? Randy Frederick, managing director of trading and derivatives at Charles Schwab Corp., said by phone from Austin, Texas. ?The VIX spiked up quite a bit and that?s back to where we were in mid-December. There?s definitely some anxiety out there.?
Bank of America Corp. and JPMorgan Chase & Co. derivatives strategists predicted in December that daily volatility will increase for equities in 2014. Deutsche Bank made a similar prediction yesterday, saying the end of Federal Reserve stimulus and intermittent panic about the rate of global growth will lead to more equity upheaval.
To Read More Click Here.