VIX’s Highest Close Since Election Sparks Record Rush to Protect

Bloomberg/Elena Popina/08-10-17

The biggest selloff in U.S. equities since May sparked an unprecedented rush for protection in the options market.

About 2.6 million puts and calls tied to the CBOE Volatility Index changed hands on Thursday, the most on record, as the VIX spiked 44 percent to close at the highest level since Nov. 8. About 3.4 call volatility options – a bearish equities trade – have changed hands for every put contract.

The scramble to hedge against further losses came as President Donald Trump ratcheted up his saber rattling against North Korea, warning that his threat to deliver “fire and fury” might not have been tough enough.

The S&P 500 Index sank 1.5 percent, shattering an unprecedented calm in equity markets, while Treasuries rallied with gold and the yen as investors sought haven assets.

PG View: When it comes to real protection, consider some gold rather than an option on an index that measures market volatility.

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