Thursday's stock market selloff pushed the Cboe Volatility Index (VIX) to its biggest one-day move since April 2025, surging more than 11 points from 16.6 to 28.2. The move has historical precedent that may interest contrarian investors.
In 19 instances since 1990 when the VIX rose at least five points from below 20, the S&P 500 Index returned a median of 4.2% three months later and 4.8% six months later, according to Bespoke Investment Group analysis. Returns were positive 68% of the time over three months and 79% of the time over six months.
"These types of sharp spikes from placid levels are like a line of thunderstorms coming through in summer," said Paul Hickey, co-founder of Bespoke. "The sky quickly darkens and wind gusts, but the loudest thunder and brightest lightning doesn't last long."
The near-term picture is murkier. One month after such volatility spikes, the median return was 2.1%, but the average was negative 0.4%, dragged down by sharp downturns in 1990 and February 24, 2020, when the Covid selloff began.
Tech stocks bore the brunt of Thursday's selling. The S&P 500 lost 4% and the Nasdaq 100 lost 6%. The Nasdaq 100 posted its worst day since March 2020. The Cboe Nasdaq Volatility Index (VXN) jumped more than 13 points to 38.3, the highest since April 11, 2025. The VanEck Semiconductor ETF (SMH) traded below its net asset value as selling in chipmakers intensified.
Options traders on SMH remained bearish, with 670,000 puts traded out of 900,000 total options. Of the $1.7 billion in options premium exchanged on the ETF, $1.5 billion was in puts, according to SpotGamma.