As traders dumped stocks in favor of "safe haven" assets like gold, the CBOE Volatility Index (VIX) -- or the stock market's "fear gauge" -- skyrocketed more than 40% yesterday, and is pacing for its biggest weekly gain since late 2015. Chest-thumping out of both the U.S. and North Korea translated into the VIX's biggest one-day jump since May, and its second-largest surge since the Brexit brouhaha of June 2016. Against this backdrop, we decided to take a look at how the stock market performs -- and the best individual stocks to own -- after these steep VIX jumps.

SPY Performance After VIX Spikes of 40% or More

Since 2010, there have been seven one-day CBOE Volatility Index jumps of 40% or more. The last time it happened prior to yesterday, back on May 17, the stock market rebounded right away, with the SPDR S&P 500 ETF Trust (SPY) higher at the one-day, one-week, two-week, and one-month markers. In fact, the SPY has been higher one week after the last six huge VIX days, and only after the August 2015 plunge was the index lower at the two-week and one-month points, according to data from Schaeffer's Senior Quantitative Analyst Rocky White.

Best Stocks to Own After Huge VIX Days

Below are the best stocks to own one and two weeks after a one-day VIX surge of at least 40%, looking at data since 2010, with every stock higher 100% of the time at both marks.

2 Biotech Stocks to Watch

Two biotech stocks stand out on both lists: Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) and Incyte Corporation (NASDAQ:INCY). VRTX stock has averaged the best return during both time frames, up 15.3% and 15.4% one and two weeks after a VIX surge, respectively. Today, Vertex Pharmaceuticals stock is up 1.6% to trade at $150.92, and has more than doubled year-to-date, touching a record high of $167.85 in late July, shortly after the company released encouraging data on its cystic fibrosis treatment. A 15.3% surge from current levels would place VRTX shares around $174, back at all-time highs.

INCY stock, meanwhile, has been runner-up at both post-VIX markers, rallying an average of 12.6% and 10.3%, respectively, one week and two weeks after the last six VIX pops. Today, Incyte stock is up 1.4% at $123.87, and has spent the past few months struggling to surmount the $140 area -- where INCY shares traded before an FDA-inspired bear gap in April. A 12.6% rally for Incyte stock would put the shares just under the $140 marker again.

FB, EA Stocks Could Hit Record Highs, If Past Is Prologue

Outside of biotech, Facebook Inc (NASDAQ:FB) stands out. The social media stock has been around for only five of the previous six VIX pops, but was higher two weeks later 100% of the time, averaging a gain of 4.6%. Facebook stock today is up 0.5% at $168.22, and has rallied more than 46% in 2017, peaking at a record high of $175.49 on July 27. Another 4.6% rally over the next two weeks would place FB stock around $176 -- in uncharted territory.

Finally, video-game maker Electronic Arts Inc. (NASDAQ:EA) caught our eye, making an appearance on both lists below. EA stock has averaged a one-week gain of 5.3% after a major VIX rally, and a gain of 6.4% two weeks out. Electronic Arts shares were last seen 1.4% higher at $115.59, and touched an all-time high of $120.25 on July 27, following a well-received earnings report. Another 6.4% rally over the next couple of weeks would also put EA stock back at record highs.

After last week's short-lived -- but dramatic -- stock market sell-off, a couple of the options trading indicators we track here at Schaeffer's have registered noteworthy extremes. And while it's not particularly shocking to see that equity put option volume has approached election-era highs, you might be surprised to see how traders have been playing VIX options.

Equity put/call volume ratio revisits November 2016 levels

First up, we have the 10-day equity-only buy-to-open put/call volume ratio, based on activity from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio measures how many puts investors have bought relative to calls -- and it's limited to equity activity in order to filter out option volume on exchange-traded funds (ETFs) and indexes, both of which are frequently used as hedging vehicles.

Per the chart below, Schaeffer's Quantitative Analyst Chris Prybal reports this 10-day put/call ratio now stands at 0.677, which is the highest such reading since Nov. 15, 2016 -- when this metric was still accounting for investors' pre-U.S. presidential election anxiety. In other words, the current ratio is reflecting a fairly healthy dose of bearishness on the part of options traders.

VIX put volume closes in on 2-year high

Last week's near-miss with a nuclear crisis prompted record options volume for the CBOE Volatility Index (VIX), with traders loading up on August 17 calls in particular. With today's VIX options settlement arriving at just 12.95, it seems safe to say that we didn't quite get the lasting volatility pop some speculative players were bracing for.

That said, record-high VIX call volume is overshadowing another storyline in the volatility options pits -- a nearly two-year high in cumulative 20-day VIX put volume. During the past 20 sessions, Prybal reports there have been 1.15 million VIX put options bought to open, which marks the highest such reading since 1.20 million in late September 2015. (Notably, that previous high-water mark occurred shortly after the August 2015 VIX eruption that carried the index to its reigning post-financial crisis high of 53.29.)

As a result, the fear index's 20-day buy-to-open call/put volume ratio has backpedaled to 3.20, which is the lowest reading since April 18, 2017. This decline in the ratio is particularly remarkable, given that the VIX call volume figured into this calculation stands at a record 3.64 million contracts.

The U.S. stock market is under pressure today, and that has the CBOE Volatility Index (VIX) -- viewed as Wall Street's primary "fear gauge" -- up 20.7% at $14.17. As such, a number of volatility ETNs are also in focus, including the iPath S&P 500 VIX Short-Term Futures ETN (VXX). In simple terms, this instrument tracks the first two months of VIX futures contracts, allowing traders a way to bet on volatility. Today, VXX is up 10.4% at $12.97, and options trading is accelerated. 

Jumping right in, speculators are showing a much stronger-than-usual preference for VXX calls today, with roughly 533,000 contracts traded. This is two times the expected intraday rate, and has volume pacing in the 98th annual percentile. Moreover, the volatility ETN's single-day put/call volume ratio of 0.44 is on track to settle just 9 percentage points from its 52-week low of 0.22, hit on July 26. 

The two most popular options today are the August 12.50 and 13 calls, and data suggests buy-to-open activity is taking place at each front-month strike. If this is the case, volatility traders are betting on VXX continuing to run higher through tomorrow's close, when the contracts expire.

Also noteworthy is a block of 8,000 weekly 9/1 13.50-strike calls, which were seemingly bought to open for 36 cents each. If this is the case, this trader spent $288,000 (number of contracts * premium paid * 100 shares per contract) on the volatility ETN breaking out above $13.50 by expiration at the close on Friday, Sept. 1.

Given the record high net short position in VIX futures, though, this could also be a result of a trader hedging against a bigger volatility spike. This could be continuing a trend, too, with VXX call open interest of 3.25 million contracts already at a 52-week high.

Regardless, anyone buying VXX options today will need a fat wallet. That is, the 30-day at-the-money implied volatility has jumped to 84.6% -- in the 95th annual percentile, meaning heightened volatility expectations are being priced into short-term premiums.

The CBOE Volatility Index (VIX) surged more than 30% on Thursday, as U.S. stocks suffered their worst day in three months. Just a week prior, the VIX -- or the stock market's "fear gauge" -- skyrocketed more than 40% in one day. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, it's only the third time ever the VIX has experienced two single-session jumps of 30% or more in one week. Below, we take a look at previous VIX signals, and how the S&P 500 Index (SPX) fared after both.

Coincidentally, perhaps, the other two signals also occurred in the month of August -- in 2011 and 2015. However, since 1990 -- when our VIX data begins -- the index typically hits its year-to-date lows around the middle of July, before bursting higher into the months of August into October. The VIX did, in fact, hit a record low of 8.84 on July 26. What's more, after the last two signals, the VIX was in the 40s, whereas the fear barometer is currently in just the low teens.

In any event, after the past two VIX signals, wherein the index rallied 30% or more twice in one week, the VIX cooled off significantly over the next month. After the August 2011 VIX signal, the index fell 30.5% over the next month; it dropped nearly 46% in the month after the August 2015 signal. 

Meanwhile, stocks -- as measured by the S&P -- turned higher over the short term. The SPX was up 7.6% one week after the August 2011 signal, and was 7.07% higher a month later. A week after the August 2015 signal, the SPX was 4.17% higher, but had pared that gain to 2.41% a month out.

While the sample size is very small, it's encouraging that the S&P 500 Index recovered after these rare VIX signals. However, as Schaeffer's Senior VP of Research Todd Salamone wrote recently, "[W]ith the looming threat fresh on the minds of investors, volatility historically low and a big short position to be unwound in the VIX futures market, I'm thinking the U.S.-North Korea crisis will prop up volatility levels. Therefore, the cost of portfolio protection will remain high in comparison to the levels during most of May, June, and July."

It's been a volatile month for the U.S. stock market, with the CBOE Volatility Index (VIX) soaring to levels not seen since the early November presidential election as political uncertainty surrounding President Donald Trump ramped up. In fact, the VIX surged 30% or more within one week -- only the third time this has happened in the history of the market's "fear gauge." And while last Thursday's 32.5% pop marked the second of these volatility spikes, VIX still ended lower on the week -- a relatively rare signal that could spell short-term trouble for the S&P 500 Index (SPX).

According to data from Schaeffer's Senior Quantitative analyst Rocky White, there have been just four other times VIX has posted a single-session gain of 30%, only to end the week at a loss. This signal last flashed in late August 2015, resulting in a one-week return of 6.7% for the VIX and a one-week loss of 3.4% for the SPX. The most extreme example of a continued volatility surge occurred after the July 2014 signal, when VIX was up 41.2% two weeks later, and 109% three months out! This coincided with a 2.7% and 5.8% drop for the SPX, respectively.

On average, VIX has returned 4.7% one week after a signal, nearly quadrupling its anytime one-week average return since 1991. This outperformance is seen at the two-week and three-month marks, too, with the elevated risk for a bigger volatility pop seen in the higher-than-typical standard deviations, too.

Stock returns, on the other hand, tend to be lower than usual after this VIX signal, with the SPX averaging a 2.6% loss looking out one month, compared to an average anytime gain of 0.8%. What's more, in the four other times the VIX pops 30% in one day and ends the week lower, SPX has not turned in a single positive performance at the two-week and one-month markers, compared to an anytime percent positive of 59.2% and 63%, respectively.