Stocks recorded their worst week since June on Friday, October 16, while the options market remained remarkably calm. The Cboe Volatility Index touched its highest intraday level since April before retreating to close at 19.4, despite the S&P 500 falling nearly 2%. SpotGamma’s Brent Kochuba said the VIX’s 2.2-point increase was relatively muted, since an analysis of 126 selloffs since 2018 indicated a rise closer to 2.6 points would have been expected. Downside protection on the Nasdaq 100 also saw limited demand, particularly for put options with strike prices between 20% and 50% out of the money. The lack of hedging through options may reflect asset managers rapidly selling stocks instead: global gross equity exposure among long-short strategies fell 8% from its recent peak, its largest drawdown in at least a decade.
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