Recent historic drops in major stock indices have pushed volatility gauges to significant heights, mirroring rare market events that historically offered buying opportunities despite near-term disruptions.
Rare Market Drop and Historical Precedent
Data indicates that while severe market storms can cause immediate disruption, historical returns after such events often recover. According to data shared on the X account OddStats, only 12 other days in stock market history prior to Thursday featured simultaneous drops where the S&P 500 lost 4% and the Nasdaq 100 Index fell 6%. This elite group of volatile sessions includes one occurrence during Liberation week 2025 and three separate instances during the pandemic in 2020. Although the median return one month following these events stands at 2.1%, the average return dips to negative 0.4% due to severe downdrafts that followed volatility surges in 1990 and on Feb. 24, 2020, at the onset of the Covid selloff.
Spike in Volatility and Bearish Trading
Technology stocks experienced particularly acute volatility as the Nasdaq 100 recorded its worst single-day performance since March 2020. The Cboe Nasdaq Volatility Index VXN surged by more than 13 points, reaching 38.3, which marks its highest level since April 11, 2025. Selling pressure among semiconductor companies intensified to the point that the VanEck Semiconductor ETF traded below its net asset value.
Despite these steep declines, options traders maintained a bearish stance heading into the closing bell on Thursday. SpotGamma data reveals that out of 900,000 total options traded on the semiconductor ETF, 670,000 contracts were puts. Furthermore, bearish put options accounted for $1.5 billion of the total $1.7 billion in options premium exchanged during the session.
