And In 2014, The VIX Spiked
Bill Luby | Jan 06, 2015 02:52PM ET
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 full-year print since 2006 and the third-lowest read going back to 1995. Of course, averages can be misleading and just as you can drown in just a few inches of water, 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 that in mind, the chart below shows the number of 20% one-day VIX spikes per year, going back to 1990. Note that when viewed 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, last year would have tied for the #2 slot, just behind the euro zone carnage from 2011.
[source(s): CBOE, VIX and More]
Perhaps the most interesting thing about such spikes is that both came during the last month of the year. Indeed, with a little rounding, the December-8 spike may have been number three. Toss in Monday’s 28.1% VIX read and that's four spikes of at least 19.5% in one month. Uncharted territory? Not quite. August 2011 took us there before. Still, it does represent something not seen in any other year -- including 2008 -- or at any time during the dotcom-bubble's burst.
There 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.
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