Expect stockmarket volatility to stick around at least another month. Investors can say goodbye to calm they recently began to enjoy.
That is the message from the market's fear gauge, formally known as the Chicago Board of Options Exchange's Volatility Index.
The VIX surged again on Friday (US time), topost a two-day cumulative spike of 64 per cent.
The index tends to rise when stocks fall. In an uncertain market investors are willing to pay hefty premiums for options that offer protection from price swings of stocks in the Standard & Poor's 500 index. Options are contracts to buy or sell a stock at a specified price and time.
The VIX reflects what investors expect the market to do over the next 30 days.
"Two weeks ago, the VIX was extremely low, and investor and trader sentiment was very complacent," says Scott Fullman, a strategist with WJB Capital Group. "Risks are greater, and people buying options are willing to pay more."
On Friday, the VIX closed up nearly 25 per cent at 40.95 points. It traded as high as 42.15 in the morning - its highest reading since April 7, 2009 - as stocks fell sharply.
The rise came as investors appeared to focus on the European debt crisis, rather than the morning's better-than-expected report on the US jobs market. The VIX calmed later but spiked again before the close.
