From BloombergFrom Mr. Wilson: ``The indicator is derived from prices of options on the S&P 100, as its name suggests. The current version, introduced five years ago, uses S&P 500 options and includes more contracts in the calculations. Their readings tend to be similar. The VIX closed yesterday at 62.90.
``In 1987, the old VIX behaved differently than it has this year because the plunge in stocks was ``a far quicker affair,'' Michael Shaoul, chief executive officer of Oscar Gruss & Son Inc., wrote yesterday in an e-mail. ``There was nothing like the same degree of economic problems at the time and no concerns about the global banking system outside of the fact that equity markets had crashed.''
``The old VIX peaked at 103.41 on Oct. 11 as the S&P 100 swung between a 3.2 percent gain and an 8.1 percent loss. The high was well below its record of 172.79 on Oct. 20, 1987, the day after the so-called Black Monday crash.”
From Chartrus.com: 1987 Crash
Stockcharts.com: Stock Crash 2008 VersionMy comment: It is quite obvious that 1987 was a shocker. From the chart perspective, there was hardly any clue that a crash would occur.
This compared to 2007-2008, which had been in a slomo descending bear market until October. In other words, the 2008 bear market had essentially conditioned the public about deteriorating market and fundamental dynamics.
And if we go by “The Kübler-Ross grief cycle”:
The recent market crash could represent as the “Acceptance phase” or in stock market lingo “capitulation” phase.
Thus, the difference in the VIX index of 1987 and today was one of expectations.: people got dumbfounded by the precipitate “one day crash” behavior of 1987 (hence the sudden realization of vulnerability) whereas the 2008 crash had partly been a process of the Kübler-Ross grief cycle applied to the stock market.
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