As the CBOE Volatility Index pulled back Tuesday after a spike in the prior session, exchange-traded products linked to the “fear index” largely held their ground.
The reason may stem from the securities’ construction, which ironically weed out some volatility, along with a high level of market uncertainty going forward.
The VIX VIX -11.16% , which tracks S&P 500 SPX +0.61% options, closed down 11% Tuesday, giving back some of Monday’s big gains when it jumped 34% to close at 18.99. That was its biggest one-day percentage jump since August 2011, a period of hypervolatility when the U.S. had just lost a triple-A rating and uncertainty over Europe’s financial situation was at a high.
U.S. stocks on Tuesday recouped about half of Monday’s losses, bolstered by housing data, consumer company results and Federal Reserve Chairman Ben Bernanke’s testimony, when he assured members of the Senate that the benefits of the Fed’s $85 billion-a-month bond buying program outweighed the costs.
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