VIX Closes at 31-day High

The increase in the VIX indicates traders were purchasing volatility as a hedge, on expectations of increased movement.
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Stocks finished down on light volume, due to disappointing jobs and manufacturing data, which added fear back into the economic recovery. The Dow Jones Industrial Average ended down 144.33 points, or 1.39%, at 10,271. The S&P 500 lost 18.53 points, or 1.69%, to close at 1075, and the Nasdaq was down 36.75 points, or 1.66%, to finish at 2178. Gold rose to its highest price since July 1, while U.S. September crude settled down $0.99, at $74.43 a barrel, after hitting a low of $73.96. The dollar fell to near a 15-year low against the yen, but rose against the euro.

The CBOE Volatility IndexI:VIX closed at its 31-day high, up 1.85 points, at 26.44. VIX September 47 calls were the most active calls with 27,000 contracting, and October 26 puts were the most active puts, with 14,000 contracts trading. The increase in the VIX indicates traders were purchasing volatility as a hedge, on expectations of increased movement. In total, 150,000 VIX call contracts traded, verses 47,000 puts.

The SPDR S&P 500 ETF (SPY) - Get Report closed down $1.91, at 107.88. SPY call option volume of 641,000 call contracts compares to 1.4 million puts. September put option implied volatility is at 25, and October is at 27. This is above its 26-week average of 22, suggesting traders are hedging for price larger movements if the market trends lower.

Puts were more active than calls on the PowerShares QQQ Trust (QQQQ) , into Friday's expiration. QQQQ closed down $0.69, at $44.86, as tech traders took profits on fear of weak hardware services spending, as jobless claims increase. QQQQ call option volume was 131,000 call contracts compared to 215,000 puts. QQQ September put option implied volatility is at 25, October is at 28 and December is at 30. The 26-week average is 26, suggesting larger outer month price movement.

Looking ahead to Friday, there is no economic data expected, but it is August Options Expiration. Notable companies reporting include: Ann Taylor (ANN) , Corinthian Colleges (COCO) , Hormel (HRL) - Get Report and The J.M. Smucker Company (SJM) - Get Report.

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