Volatility Index Trades Above 75 For First Time

The benchmark index for U.S. stock options surged above 75 for the first time and headed toward its fifth straight record as stocks plunged in a global rout.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, climbed 18 percent to a record 75.46 at 2:03 p.m. in New York. The index measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index, which tumbled 6.8 percent to 847.67 and headed toward its worst week ever.

Volatility benchmarks in the U.S. and Europe soared to records as stocks tumbled around the world on growing concern international attempts to prop up financial markets will fail to avert a recession. The MSCI World Index of 23 developed countries lost 6.8 percent, bringing this week’s slide to 22 percent, the most since records began in 1970.

The VIX rose yesterday to 63.92 and has closed at a record for the past four days. It has averaged 60.15 this week, almost triple its 22.39 average in its 18-year history. It had never exceeded 50 before this week.

Old VIX

The VXO Volatility Index, a predecessor to the VIX that reflects the price of using options on the S&P 100, rose as much as 31 percent to 99.65, the highest since October 1987. The index, known as the “old VIX,” reached an intraday record of 172.79, the highest in its 22-year history, a day after the 1987 stock-market crash.

Volatility Futures

October VIX futures added 14 percent to 59.46. November futures rose 7 percent to 40.30.

The CBOE’s NDX Volatility Index, based on prices paid for options on the Nasdaq-100 Index, increased 15 percent to 80.41, the highest in its almost seven-year history. The Nasdaq-100, which gets 61 percent of its value from technology companies, dropped 4.8 percent.

Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility, or stock swings, will increase or decrease.

In Europe, the benchmark gauge of stock-market volatility closed at a record. The VStoxx Index, which measures the cost of protecting against a decline in shares on the Dow Jones Euro Stoxx 50 Index, jumped 39 percent to 81.03 in Frankfurt as the equity benchmark dropped 7.9 percent to a five-year low.

In Germany, the benchmark gauge of that country’s stock- market volatility also closed at a record. The VDAX-New gained 21 percent to 64.19 in Frankfurt. The measure is derived from prices paid for options on the DAX Index, which lost 7 percent.

France’s CAC 40 Volatility Index and the Dutch AEX Volatility Index both climbed to the highest in their almost eight-year histories and Belgium’s BEL 20 Volatility Index remained almost unchanged from yesterday’s record. Switzerland’s VSMI Index of volatility rose to a six-year high.