Silent Sell-Off: The 10% Drop Without Panic
Silent Sell-Off: The 10% Drop Without Panic
By:Kai Zeng
The S&P 500’s latest pullback caused only a record-low VIX response. What does that say about volatility and market sentiment?
- It took SPX 22 calendar days to drop exactly 10% in the current sell-off, pushing the VIX to 28% at the highest point.
- Pullbacks of more than 10% in 30 calendar days have happened only 16 times in the past two decades.
- The current correction has the same daily percentage move as the long-term average, close to half a percent per day.
- However, the peak VIX level as well as the VIX range during this sell-off have remained significantly lower than usual.
The S&P has experienced a significant correction over the past month, declining 10% from its recent peak. This pullback provides an opportunity to examine how this correction compares to historical patterns and what the volatility metrics tell us about market sentiment.
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The recent market decline saw the S&P drop precisely 10.0% based on closing prices and 10.5% when measuring intraday prices over a span of 22 calendar days. To put this in perspective, we can examine historical data.
Our analysis of SPX data from the past two decades shows these sharp corrections are relatively uncommon. Using a methodology that eliminates overlapping decline periods by counting only the largest drop in any 30-day window, we identified just 16 instances of the market falling more than 10% in a month.
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The current correction is progressing at about half a percent down per day, which aligns with historical averages. This rate of daily decline suggests the market is following typical correction patterns in terms of momentum, even if the total decline is slightly smaller than some historical examples.
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Volatility Response
What distinguishes this correction isn't its magnitude or pace but instead the market's volatility response. During the current decline, the VIX index rose only 10 points and peaked at 28—substantially lower than the historical median increase of 16 points during similar corrections.
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This marks the lowest VIX peak ever recorded during a 10% SPX correction, suggesting a notable absence of the panic selling and volatility spike typically associated with such significant price declines. The lack of capitulation that normally characterizes market bottoms raises important questions about market dynamics.
Options market and volatility
The options market provides additional confirmation of this unusually mild volatility. Examining a 16 delta strangle on March 13, 2025, we found options premiums significantly lower than those observed during previous corrections as a percentage of the underlying price.
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This reduced premium environment aligns with the subdued VIX readings and indicates traders are pricing in less expected volatility despite the substantial price decline. Such divergence between price action and volatility expectations can provide valuable insights for positioning strategies.
The disconnect between price decline and volatility response is the key anomaly in this correction.
Kai Zeng, director of the research team and head of Chinese content at tastylive, has 20 years of experience in markets and derivatives trading. He cohosts several live shows, including From Theory to Practice and Building Blocks. @kai_zeng1
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