Traders professing bafflement over recent ominous moves in volatility indexes got some clarity on Thursday.

The situation -- the VIX’s persistent and unusual advance in tandem with the S&P 500 -- was thought unsustainable. On Thursday, it came asunder, as the biggest selloff in four months swept through U.S. equities, particularly tech stocks.

A host of theories were offered to explain the alignment. Today, the simplest seemed to apply. Traders worried about the straight-up trajectory of stocks were paying up for protection in the market for equity derivatives, boosting options prices. With the Nasdaq 100 down 5% at 12:56 p.m. in New York, that prudence is paying off.

“We were seeing a market that was both risk-averse and highly complacent at once,” said Steve Sosnick, chief strategist at Interactive Brokers. “That’s rarely sustainable.”

To be sure, another hypothesis on why the VIX and the market rose at the same time also plays into today’s action. It’s that newbie traders, not content with 77% gain in the Nasdaq 100 since March, were purchasing call options hand-over-fist to leverage their bets on tech stocks. In that view, today’s fall represents long-overdue comeuppance for people whose euphoria got the best of them.

In the three trading sessions through Wednesday, the Nasdaq 100 rose roughly 1% or more each day. At the same time, the Cboe NDX Volatility Index (VXN) also climbed. Usually as stocks go up, measures of implied volatility go down. But lately that relationship has been broken.

Also catching Wall Street’s attention was a growing gap between the Nasdaq 100’s “fear gauge” and a similar version for the broader S&P 500, the VIX. Even though tech shares have been considered quasi safe-havens in the Covid-19 stock market, VXN exploded 10 points higher than the Cboe Volatility Index in recent days -- the widest gap in 16 years.

The tech-heavy Nasdaq 100’s rout comes after an unrelenting run that had pushed the index 30% above its trend-line over the past 200 days. Up over 50% in five months, the benchmark was coming off of its most forceful run since the dot-com era. Now, $700 billion of value has been erased from the index in a day.

In truth, when markets go up as fast as they have recently, they rarely do it in a straight line -- a fact that bulls can take comfort in as they stare at a 7% drop in Tesla Inc. and a 5% plunge in Apple Inc. In 1999, a year when the Nasdaq 100 doubled, it fell more than 4% on five separate days. Owning hedges is both prudent in such markets and can also be part of a larger bullish position.

One theory for the volatility-stock tandem move held that extreme demand for bullish call options to bet on further gains in megacap tech was further fueling price appreciation as dealers were left to hedge.

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