The Cboe Volatility Index (VIX) closed at 45.31 on Friday — its highest since April 2020 — as escalating trade tensions sent the S&P 500 to an 11-month low.
Total put option volume surged to a record, signaling a rush by investors to hedge against further losses. The VIX, often called Wall Street’s “fear gauge,” spiked early in the day when China retaliated against U.S. tariffs, and remained elevated after Fed Chair Jerome Powell signaled no urgency to cut rates.
“This isn’t quite market capitulation, but it shows real stress,” said Stuart Kaiser of Citi.
The market turmoil caught many traders off guard. Ahead of the week, options markets had priced in bigger moves from jobs data than from tariffs — a major miscalculation. “The market got this wrong,” said Benn Eifert of QVR. “Some investors put too much faith in the idea that Trump’s tariff threats were just strategy.”
Friday’s action was especially painful for investors using index options to hedge individual high-volatility stocks. “It’s been a brutal mismatch,” said Alon Rosin of Oppenheimer.
While recent volatility spikes — like those in August and December — faded quickly, analysts warn this one may persist as recession fears grow.
Cboe’s Mandy Xu noted a shift from targeted trades to broad-based selling. “Yesterday was about trade war winners and losers. Today is about economic fear,” she said.