Volatility Analysis Of Wednesday’s Stock Trading

One what was one of the more interesting days in volatility in a long time, I thought I should pass along a few random thoughts:

1. The intraday tick for tick positive correlation between the VIX (^VIX) and the SPX (^GSPC) was as strong as I have ever seen. Most of the time the VIX and the SPX move in opposite directions. Today it was almost as if someone has inverted the gravitational forces acting upon these two indices. (For more on the correlation between the VIX and the SPX, check out the posts with the SPX-VIX correlation label.)
2. The SPX finished the day up 2.96%, with the VIX up 3.48%. This is the first time ever that both indices moved more than 2.8% in the same direction on the same day.
3. For more on days in which the VIX and SPX both have strong moves to the upside, check out my June 1^st post, Eerie Déjà vu as VIX and SPX Both Jump More Than 2.5%.
4. When both the VIX and SPX are up on the same day, this is historically bearish, generally conveying an edge of 0.25% or to the bears for 3-5 days. This edge begins to diminish substantially after about a month or so.
5. Regarding today’s VIX movement, keep in mind that the VIX gapped down about 0.80 when Intel (INTC) earnings were announced after hours yesterday. So with the SPX essentially frozen, there was a 0.80 offset going into the day from the 15 minute twilight zone while trading that took place yesterday from 4:00 to 4:15 p.m. ET. If we were to back out the 0.80 after hours VIX drop, then the VIX would have finished approximately flat today - still an interesting development, but a lot less noteworthy.
6. As predicted earlier today (VXX Volume Spiking to New Record as Investors Bet on Increasing Volatility), the iPath S&P 500 VIX Short-Term Futures ETN (VXX) crushed the old volume record, with 1,537,844 shares exchanging hands, eclipsing the old record by more than 440,000.
7. Finally, Tuesday was a particularly interesting day to see volatility drop so low, with so many very important volatility events right around the corner, including a critical earnings reporting season, a flood of highly anticipated economic data and options expiration.

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