VIX Falls to 2010 Low as S&P 500 Swings are Smallest of Year

The benchmark index for U.S. stock options fell to a three-year low as the Standard & Poor’s 500 Index moved in its narrowest range since April 2007 and rose for a fifth day to reach a two-year high.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, fell 6.3 percent to 15.45 as of 4:15 p.m. in New York. That’s below the prior 2010 closing low of 15.58 on April 12, and the lowest closing level since July 2007. The index measures the cost of using options as insurance against declines in the S&P 500, which rose 0.3 percent and moved in a 0.35 percentage-point range between today’s intraday high and low, less than half the 0.83 average over the past four weeks.

“We’re having a wind-down in the market as we close down the year and we’re seeing small percentage moves in the market,” said Dan Deming, a VIX options trader at Stutland Equities LLC on the CBOE floor. “People are looking at the timeline for the next couple weeks and, barring any unforeseen thing, the sense is that most people are done playing in the market. You can really feel the lack of activity on the floor.”

Ten-day realized volatility, a gauge of past price swings, for the S&P 500 has fallen to 5.92, near the four-year low of 4.56 that it reached Nov. 2 -- a decline of more than two-thirds from this year’s peak of 37.86 in May.

VIX futures retreated. February’s contracts slumped 0.5 percent to 21.30, while April’s lost 0.4 percent to 23.80. The VIX trades 7.5 points below its three-month future, the widest spread in two months.

The index has tumbled by two-thirds from this year’s peak of 45.79 in May, and is almost a third below this year’s average of 22.68. The volatility gauge has averaged 20.40 over its two- decade history.

“VIX is pricing in the quiet that we will see until next week,” said Chris Rich, head options strategist at JonesTrading Institutional Services LLC in Chicago. “You can hear the premium hiss out of the options.”

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.