Record VIX Retreat Is Just Another Crash Scare Failing To Happen

By Callie Bost

Another bout of turbulence in the U.S. stock market has been defused, this time with record speed.

The Chicago Board Options Exchange Volatility Index slid 8.5 percent Thursday to 12.11, extending its five-day decline to 39.4 percent. That’s the biggest decrease in the VIX since it began in 1990, according to data compiled by Bloomberg.

Investors are getting used to the pattern: a crisis arrives, this time from Greece, the market trades erratically for a few weeks, and then volatility plunges as the concern recedes. Half of the 10 biggest five-day declines in VIX history have occurred since the beginning of 2013, according to data compiled by Bloomberg and MKM Partners’ Jim Strugger.

“The VIX flared up and fell quickly because the world got scared, but this too shall pass,” said Sean Heron, who helps oversee $30 billion for Glenmede Trust Co. “People are very quick to sell out of decaying volatility. The sellers feel more brazen and the buyers feel more reluctant.”

The VIX dropped Thursday as the Standard & Poor’s 500 Index climbed 0.8 percent. U.S. stocks have gained 3.6 percent in the past five trading sessions, the most since December. It’s been 3 1/2 years since any decline in the S&P 500 exceeded 10 percent.

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