The 'fear index' freaks, surges more than 60%

The benchmark index for U.S. stock options surged to the highest since February 2007 as stocks tumbled on concern that Europe's debt crisis is worsening. The VIX, as the Chicago Board Options Exchange Volatility Index is known, jumped 60 percent to 39.82 at 3:30 p.m. in New York and earlier reached 40.71. The index measures the cost of using options as insurance against declines in the Standard & Poor's 500 Index, which lost as much as 8.6 percent. “We are in, and will remain in, turbulent times,” said Karlheinz Muhr, chief executive officer of New York-based Cenario Capital Management LLC, which advises institutions on derivatives. “There's so much fog on the political and economic fronts and the rebound in the economy isn't materializing. We'll be seeing wider swings in volatility itself.” VIX futures also increased as traders boosted bets stock market swings will remain wider than average. July futures rose 12 percent to 29.60. September's gained 7.7 percent to 29.50. The S&P 500 moved in an 8.73 percent range between today's intraday high and low, the widest since Nov. 20, 2008, when the VIX closed at 80.86, the highest in its two-decade history. The Dow Jones Industrial Average posted its biggest intraday loss since the market crash of 1987 and yields on Greek, Spanish and Italian bonds surged on concern European leaders aren't doing enough to stem the region's debt crisis. “The massive jump in the fear gauge points to the all-out panic investors are feeling right now while watching equities across the board in free-fall,” said Caitlin Duffy, an equity options analyst at Greenwich, Connecticut-based Interactive Brokers Group Inc.