Yesterday’s VIX Drop Is Fifth Largest Ever in Percentage Terms
Oct 14, 2008

Yesterday the VIX registered its largest one day point drop in history, falling 14.96 points, but what does that mean?

If history is any guide, the drop in the VIX may not be particularly meaningful. The previous largest drop in the VIX in absolute numbers dates back to September 1, 1998. On that day, there was a brief lull in the Long-Term Capital Management crisis and the VIX pulled back from 44.28 to 36.48. Just three days later, however, the VIX was back above 44.

In percentage terms, yesterday’s 21.4% drop in the VIX is the fifth largest one day drop in the VIX in 19 years.

I wrote about previous instances of 20% drops in the VIX a little over a year ago in On the Rarity of a 20% One Day Drop in the VIX. Since that post, the VIX dropped 22.5% on 11/13/07 and exactly 20% on 3/18/08.

In the six previous instances in which the VIX has dropped at least 20%, the SPX has generally underperformed the historical averages slightly going forward.

Maybe someday I should publish the Guinness Book of Volatility Records…