Wall Street anxious on Europe, but no bets on disaster

By Angela Moon

Wall Street

At least that's the case in the options market. Although Wall Street's so-called fear gauge, the CBOE Volatility Index VIX <.VIX>, rose 10 percent on Tuesday, the move is not dramatic by recent standards.

The VIX rose as U.S. stocks fell 2 percent <.SPX> following the cancellation of a European financial ministers meeting, which spooked markets just 24 hours before European leaders are due to adopt a plan to resolve the crisis.

The 10 percent jump in the VIX on Tuesday is dwarfed by recent moves. The last time the S&P 500 fell 2 percent, on October 17, the VIX shot up by 20 percent.

And considering the S&P is up nearly 9 percent for the month, the drop in shares was also seen as relatively soft.


The VIX generally has an inverse relationship with the stock market as measured by the S&P 500. When the S&P moves lower, the VIX usually rises, but the VIX tends to move up at a much higher magnitude than the S&P moves down.

Equities had risen recently on hopes a resolution to Europe's sovereign debt crisis was on the horizon and a reduced likelihood of a U.S. recession after stronger-than-expected corporate results and economic data.

However, some say the market has managed its own expectations lower for a solution to Europe's problems.

"The market is realizing that this issue, which has been really building up for years, cannot be solved or improved that easily," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

(Reporting by Angela Moon, Editing by Leslie Adler)