VIX Rises for Sixth Day in Longest Streak of Gains Since 2008
bloomberg.com
The benchmark measure of U.S. options rose for the sixth straight day, the longest streak since January 2008, as investors prepared for bigger share-price swings before congressional elections and the Federal Reserve’s decision on economic stimulus in the next two days.
The Chicago Board Options Exchange Volatility Index gained 3 percent to 21.83 at 4:14 p.m. in New York, bringing its six- day advance to 16 percent. The VIX has risen since closing on Oct. 22 at 18.78, the lowest level since April 29. The index measures the cost of 30-day options on the Standard & Poor’s 500 Index, and usually increases when stocks fall.
The Fed will probably begin a new round of unconventional monetary easing this week by announcing a plan on Nov. 3 to buy at least $500 billion of long-term securities, according to economists surveyed by Bloomberg News. The Republicans have a 94 percent chance of taking control of the U.S. House of Representatives tomorrow, helping them block President Barack Obama’s policies, according to bets on Intrade, a Dublin-based online prediction market.
“Everyone in the market is getting ready to react on the outcomes later this week,” said Tim Hartzell, who oversees $300 million as chief investment officer for Houston-based Sequent Asset Management. “You want to hedge that risk of increased volatility.”
The S&P 500 surged as much as 1.1 percent today after China’s manufacturing expanded at the fastest pace in six months in October. It then fell 0.5 percent as JPMorgan Chase & Co. retreated up to 1.4 percent. ProPublica said the Securities and Exchange Commission is investigating whether the bank let a hedge fund illegally pick assets for a collateralized debt obligation backed by subprime mortgages. The news organization cited people familiar with the investigation.
The stock index ended the day with a 0.1 percent gain.
Fed policy makers meeting tomorrow and Nov. 3 will restart a program of securities purchases to spur growth, reduce unemployment and increase inflation, said 53 of 56 economists surveyed by Bloomberg News last week. Twenty-nine estimated the Fed will pledge to buy $500 billion or more. |
