2014 Had Third Highest Number of 20% VIX Spikes

By most measures, one would think that 2014 was a relatively quiet year for the VIX and equity volatility in general. In fact, the average VIX of 14.19 was the lowest for the full year since 2006 and the third lowest going back to 1995. Of course, averages can be misleading and just as you can drown in a river with an average depth of one inch, anyone who was short the VIX when it spiked all the way up to 31.06 in October knows that minimum and maximum readings are important.

With this in mind, the chart below shows the number of 20% one-day VIX spikes per year, going back to 1990. Note that when looked through the lens of those 20% spikes, 2014 was the third most volatile year for the VIX since 1990, with the same number of 20% VIX spikes as 2008! Additionally, if one were to round up a near miss from December 8^th, last year would move into a tie for the #2 slot, just behind the euro zone carnage from 2011.

[source(s): CBOE, VIX and More]

Perhaps the most interesting thing about the 20% VIX spikes is that two of them came during the last month of the year and with a little rounding, the December 8^th spike could have been number three. Toss in yesterday’s 28.1% VIX spike and that is four VIX spikes of at least 19.5% in one month. Uncharted territory? Not quite, with August 2011 having already marched down that path, but something not achieved in any other year, including 2008 or at any time during the bursting of the dotcom bubble.

The have been a number of important changes in the volatility space during the past year or so and going forward I will address quite a few of them, with additional analysis and commentary.

Related posts:

• All-Time VIX Spike #11 (and a treasure trove of VIX spike data)
• The Biggest VIX Spike Ever: A Retrospective
• VIX Sets Some New Records, Suggesting Volatility Near Peak
• Highest Intraday VIX Readings
• Short-Term and Long-Term Implications of the 30% VIX Spike
• VIX Spike of 35% in Four Days Is Short-Term Buy Signal
• Lessons from the Post-2/27 VIX Price Action
• VIX Approaches Pre-2008 Record Highs
• VXO Chart from 1987-1988 and Explanation of VIX vs. VXO
• Volatility History Lesson: 1987
• Volatility During Crises
• Chart of the Week: VXV and Systemic Failure
• Euro Volatility and Risk
• The Evolution of European Equity Risk
• Forces Acting on the VIX
• A Conceptual Framework for Volatility Events

Disclosure(s): short VIX at time of writing

The Year in VIX and Volatility (2011)

One of the most-loved charts I assemble each year is my retrospective look at the year in volatility. I already touched on some of the highlights of event volatility in text form in Expectations, Surprises and Fear in 2011, but this is one case in which I believe a picture does a better job of telling the story in the context of a timeline for the entire year.

From a volatility perspective, the first half of 2011 was relatively benign, even though the global social and economic fabric was ripped by Arab Spring and the Japanese trio of disasters which came in the form of the earthquake, tsunami and nuclear meltdown.

Things were much more promising during the middle of the year when the Greek parliament voted in favor of austerity and the euro zone agreed to expand the European Financial Stability Facility (EFSF) to €780 million.

For a while, there was considerable angst surrounding the bipartisan politics associated with the U.S. debt ceiling deadline at the beginning of August, but only after the Democrats and Republicans failed to come up with a meaningful debt reduction deal did investor anxiety shift back to Europe. Ironically, the downgrade of the U.S. debt from AAA to AA+ had very little impact on Treasury securities, which actually began to rally sharply after the downgrade. When Europe returned to the center stage, however, the sovereign debt crisis was escalating rapidly and it was now Italy that was in the crosshairs. The VIX shot up to 48 on August 8^th and was regularly above 30 through the end of November, setting a new record for persistent backwardation in the VIX futures in the process.

The VIX was a high wire act throughout August and September, with multiple excursions into the 40s. Even after the S&P 500 index bottomed on October 4 at 1074, the VIX remained stubbornly elevated in October and November, before finally falling into the 20s in December. While the SPX was essentially unchanged for the year, the VIX ended 2011 at 23.40, up 31.8% over 2010’s close of 17.75. At the same time, the VIX futures are calling for a VIX of between 29 and 30 by the mid-point of 2012, suggesting that volatility will climb higher once again in the coming months.

In a year where most asset classes struggled mightily, volatility was one of the few great long positions. With a higher starting point going into 2012, it will be difficult for the VIX to repeat its market-beating performance once again, but if the euro zone and some of the geopolitical flash points fail to make progress, 2012 may indeed be the year of the VIX.

Finally, since I had so many requests for a high-resolution version to download last year, I am going to preemptively offer a full resolution PNG screen capture of the graphic below for download here.

Related posts:

• Expectations, Surprises and Fear in 2011
• Top Posts of 2011
• The Year in VIX and Volatility, 2010
• High Resolution Version of “The Year in VIX and Volatility” Chart Available
• Chart of the Week: The VIX and Volatility in 2009
• The Year in Global Volatility (2008)

[source(s): StockCharts.com]

Disclosure(s): none

Top Posts of 2011

It seems hard to believe, but next week I will celebrate the fifth year anniversary of my first post (VIX and More: An Introduction) at VIX and More. Traditionally I have set aside some time at the end of the year to recognize the top 25 most read posts for archival purposes and as a proxy for how well some of what I have written has resonated with a broad base of readers. For the record, each year I also attach the hall of fame label to a handful of posts that I believe have particularly compelling and/or original content, regardless of readership.

Looking at the top posts of the year below, this is the first year there has been a strong representation from shorter more Twitteresque posts, with a diminution of the long-winded more academic research pieces that have populated these lists in past years. Part of this is no doubt due to timing. By way of illustration, when the VIX is over 40, pretty much anything I post is going to attract a wide audience of people who want to know how to interpret recent market moves and understand the implications for the direction of stocks and volatility going forward. On the other hand, when I write one of my better thought pieces and the VIX is at 14, it is sometimes a struggle for that post to find a broad audience.

Another theme I noticed this year is that the list is heavier than usual on the VIX, VIX-based exchanged-traded products and volatility subjects. In previous years I have enjoyed straying for the central themes of this blog and have used features such as the Chart of the Week (discontinued in February when my blogging took a back seat to family matters, but likely to return in 2012) as an excuse to focus on a broader basket of investment themes.

This year has been a target-rich environment in the volatility space and I hope I have been able to expand the knowledge base of those who visit here on a regular basis. Thanks to all whose efforts have contributed to making VIX and More what it is and best wishes for a healthy, happy and prosperous 2012.

1. VIX Term Structure Evolution Over the Last Ten Days
2. VIX Suggests Investors Don’t Believe Rally Is Sustainable
3. Shorting VXX and Long XXV or XIV
4. The Year in VIX and Volatility (2010)
5. VIX Backwardation Commentary
6. Echo Volatility and Another VIX Double Top
7. Managing Risk with a Short VXX Position
8. S&P 500 Index 20-Day Historical Volatility Hits 39-Year Low
9. Front Two Months of VIX Futures Slip Back Into Contango
10. SPX Pullback History, 2009-2011
11. VIX Over 31 and SPX Down 12.5% from Peak as Bottom Nears
12. Chart of the Week: The Year in Economic Data (2010)
13. Chart of the Week: World Food Prices
14. VIX Sets Some New Records, Suggesting Volatility Near Peak
15. Chart of the Week: VXX Celebrates 2^nd Birthday
16. New VIX Backwardation Record
17. VIN, VIF and an Obsolete VIX
18. Now Sixteen Volatility ETPs, Four of Which Are Optionable
19. Economic Data Not Supporting Gloom and Doom Forecasts – At Least for Now
20. VIX Reflecting Skepticism About Rally
21. Initial Thoughts on Using the iPad for Trading
22. The Convergence of VIX and VIX Futures at Expiration
23. Is Volatility a Better Play for Silver Than Direction?
24. December Is the Cruelest Month…For the VIX
25. Chart of the Week: the VIX Since 2007

Related posts:

• Top Posts of 2010
• Top Posts of 2009
• Top Posts of 2008
• One Year Blogiversary! (includes top 25 posts of 2007)
• The 1000^th Post
• The Post of the Month: An Informal History of VIX and More

Disclosure(s): none