VIX Posts Its Biggest Six-Day Retreat Since 2008 as Global Stocks Advance

The benchmark measure of U.S. stock options completed its biggest six-day drop since November 2008 as concern that this month’s Japanese earthquake will curb global economic growth eased.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, fell 6.1 percent to 18 at 4:15 p.m. New York time, extending its retreat since March 16 to 39 percent. That’s the biggest drop over the same number of days in 28 months. The VIX needed to fall below 17.53 to beat the six-day record set two months after Lehman Brothers Holdings Inc.’s September 2008 bankruptcy sent stocks plunging.

“This market is as remarkably resilient as any I’ve seen,” said Mike Shea, a managing partner and trader at Direct Access Partners LLC in New York. “We had a nuclear disaster in Japan and the Mideast two days from who-knows-what, and with that, you’d think the VIX would stay at 30.”

Global stocks advanced for a sixth day, the longest rally for the MSCI World Index since September, amid improving earnings and speculation the need for European bailouts may end with Portugal. Tokyo Electric Power Co. continues to fight to prevent radiation from leaking at a nuclear plant damaged by the 9-magnitude quake and resulting tsunami on March 11.

The VIX measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index, which rose 0.8 percent today after corporate profit topped analysts’ estimates and a government report showed fewer jobless claims.

May VIX futures lost 2.6 percent to 21.05. June contracts decreased 2 percent to 21.90.

‘People Feel Confident’

“People feel confident that the market is not going to take a dive,” said Mark Sebastian, director of education at Option Pit Mentoring in Chicago. “The market has processed what happened last week and decided that the risk of an absolute crash is low.”

Options prices and bets on higher equity volatility jumped from Tokyo to Frankfurt and Chicago last week as investors sought protection against stock-market losses amid concern that Japan couldn’t contain the radiation leak. The VIX climbed 46 percent in the first three days of last week to close at 29.40 on March 16, the highest since July.

In Europe, the benchmark gauge of stock-market volatility also fell for a sixth straight session today. The VStoxx Index (V2X), which measures the cost of protecting against a decline in the Euro Stoxx 50 Index, slumped 7.6 percent to 22.10. The Euro Stoxx 50 stock index gained 1.5 percent.

To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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