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Investors can expect some continued swings in the market for another eight trading days at least, according to the Goldman Sachs derivatives desk.
“While 2008 and 2020 brought us more volatility, Monday (August 5) was historic in the sense that we’ve never seen the VIX (VIX) move >40 points in one day, not even close,” Goldman said.
“Going back thru the volatility index’s history (thru 1990), when you’re witnessing the VIX whip around by 10-20 points (let alone 40), you’re generally seeing SPX trade in a ~5-10% intraday band … we didn’t even breach a 3% SPX trading range Monday (930am-4pm),” they added.
“This was a vol market shock, not a stock market shock.”
Market conditions will remain “choppy” until the market gets through the August 21 VIX expiry, Goldman said.
“This VIX options expiry is as important as ever given how many options are now outstanding across the market – getting thru this event will help free up balance sheet for market participants, and in turn, help boost liquidity in the market,” they noted.
They added that VIX futures liquidity remains “at the worst levels on record.”
