The Volatility Alarm That Hasn't Sounded in 13 Years

The S&P 500 Index (SPX) is on pace for its worst three-day stretch in more than a decade

Aug 24, 2015 at 10:39 AM
facebook twitter linkedin

The S&P 500 Index (SPX) got hammered last week, along with its fellow market indexes. In fact, the broad-market barometer dropped 2.1% on Thursday, another 3.2% on Friday, and is poised to surrender yet another 3% today -- which would mark the first time in 13 years the SPX has given up 2% or more in three straight sessions.


Per Schaeffer's Senior Quantitative Analyst Rocky White, this signal could suggest more volatility ahead, if history is any guide. Going back to 1928, this steep a sell-off has happened just 13 times (nine in the Great Depression era), and the SPX has been positive in the subsequent week less than half the time -- compared to 56% of the time under "normal" circumstances. The average one-week loss is 7.3%, compared to a 1.9% anytime loss, while the average one-week gain is 8.7%, compared to 1.7% anytime. 

Going out to six months, the SPX has been positive after a steep sell-off 54% of the time, with an average loss of 26.4%, and an average gain of 24.5%. On the flip side, the SPX anytime six-month returns are positive two-thirds of the time, and volatility has been relatively muted, with an average loss of 10.4% and an average gain of 10.8%.  




If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!



Special Offers from Schaeffer's Trading Partners