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One Year Later: Revisiting Last October's Volatility

October arrived last week with the markets showing fall jitters, as the Dow fell over 200 points on disappointing economic data last Wednesday. As a result, the CBOE Volatility Index flirted with 1-month highs towards the end last week. However, even though the VIX hit levels of just over 29 late in the week, remember it was still a far cry from its highs of almost 90 at the end of last October.

Nevertheless, market watchers and investors hope that this October won’t bring a repeat of the extreme swings that the markets experienced one year ago.

A Look Back: October 2008’s Volatility

While September 2008 saw a tidal wave of news that shook the stock market and changed the entire financial landscape (Fannie/Freddie conservatorship, Merrill-B of A merger, Lehman bankruptcy, government’s controlling stake in AIG, Goldman Sachs/Morgan Stanley transformation to bank holding companies), it was only the beginning of the markets’ turmoil. Although the S&P 500 dropped 9% in September, the index plunged nearly 17% in October for its worst month since the crash in October 1987.

October 2008 was also an exhausting month for investors and traders, who had to stomach extreme market volatility (both to the upside and downside) nearly every day during the month. As a matter of fact, six of the Dow’s top ten point changes in 2008 were in October alone:


The closing point changes only paint one part of the picture, however. Digging deeper and looking at the intraday movements reveals that the Dow (incredibly) never had a point swing of fewer than 250 points in any day last October. In fact, of the 23 trading sessions that month, the Dow moved at least 400 points during the day eighteen times!

October 2008 was also an exhausting month for investors and traders, who had to stomach extreme market volatility (both to the upside and downside) nearly every day during the month. As a matter of fact, six of the Dow’s top ten point changes in 2008 were in October alone:


In the end, those impressive moves each day gave the Dow an average daily point spread of nearly 600 points in October 2008 – triple the normal range for the index during a good portion of 2008 & 2009.


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