Natixis: “The VIX Spike Corresponds To a 15% Market Crash”

Still shocked by the VIX surging over 50? Well, here’s some good news: it could be worse, much worse. In fact, as Natixis’ William Imbrogno calculates this morning, the VIX spike – the largest in history, and still rising – should correspond to a 15% market crash.

Here is the note from the director of equity derivatives flow at Natixis:

The VIX spike was the largest in history and should correspond to a 15% market move, the drop of 4% on the SPX should correspond to an increase in the VIX of 5 points.  

Showing the asymmetrical impact of the short squeeze on volatility given the dominance of Algo’s, vol control, CTA’s  and short volatility strategies.

Perhaps this is a strong case to reduce the reliance on systematic automated strategies in favour of active management?

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