Spike in the VIX Index

During the recent market correction we noticed a seldom seen 100% spike in the VIX Index.  We looked back over the VIX since its inception in 1990 and found four other similar such periods.  We should point out that this analysis must be taken with a grain of salt, because there is a direct correlation between the VIX and the speed of present market declines.  In other words, when the S&P 500 goes down quickly, the VIX goes up quickly. 

Below we drill further into these periods of a spike in the VIX to see where the worst day occurred.  Not surprisingly, it is always near the end.  The graph below divides the period that the VIX increased into tenths, the left is the beginning of the period, the right is the end.  The current period came in nearly in-line with the spike in June, 1990; however, the worst day was more in-line with July of 1998.  We should also point out that all of the periods occurred around the summer months, and on average the market gains in response to the spike.

Comments

[bzbtrader]

Why were these VIX spikes not included in your study?
@ 102%
May 5, 2006...Vix close 11.62
June 14, 2006...Vix close 23.81
and by lowering the bar to 98%,
Feb 16, 2007...Vix close 10.02
March 5, 2007...Vix close 19.63

[Cleve]

BZBtrader:
To find the spikes we ran a 20% filter on the VIX. This provided us with periods where the VIX went up at least 100%, without a decline of 20% on the way up. In effect, the "spikes" we list above are more or less straight up without a significant decline. Hope this clarifies.

--Cleve

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