VIX Climbs to Two-Month High on Growing European Debt Concern
Ireland's prime minster Brian Cowen
Aidan Crawley/Bloomberg
Brian Cowen, prime minister of Ireland, speaks during a press conference in Dublin, Ireland.
Brian Cowen, prime minister of Ireland, speaks during a press conference in Dublin, Ireland. Photographer: Aidan Crawley/Bloomberg
The benchmark index for U.S. stock options rose to a two-month high amid concern that European governments won’t contain the region’s debt crisis.
The VIX, as the Chicago Board Options Exchange Volatility Index is known, rose 9.3 percent to 23.54 as of 4:15 p.m. in New York. It closed above its average price from the past 200 days for the first time since Oct. 4. The VIX measures the cost of options used to protect against losses in the Standard & Poor’s 500 Index, which fell 0.6 percent to 1,180.55. The volatility gauge has rebounded after falling to 18.04 on Nov. 19, the lowest level since April 26.
“We’re seeing this continued momentum picking up in the euro zone as it kind of feeds on itself and that’s got people cautious,” said Dan Deming, a VIX options trader at Stutland Equities LLC on the floor of the CBOE. “There’s been an increase in seismic activity in the VIX with significant moves and a definite trend higher. There’s something underneath this market that’s got a lot of people nervous.”
Stocks fell around the world amid concern the European debt crisis is worsening. Equities, government bonds and the euro are being dragged down by concern Portugal and Spain may suffer the fate of Ireland, which had to ask for an 85 billion-euro ($111 billion) rescue package to help bail out its banks.
In Europe, the benchmark gauge of stock-market volatility increased for a third day to close at the highest level since July. The VStoxx Index, which measures the cost of protecting against a decline in the Euro Stoxx 50 Index, advanced 1.3 percent to 31.07 in Frankfurt. The Euro Stoxx 50 lost 0.7 percent.
To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net.
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.
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