Stocks Post Worst Week Since June

Volatility rose sharply on Friday as the S&P 500 fell nearly 2%, with traders showing little appetite for index options hedges.

Updated on Nov. 2, 2026 in Stock Markets

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Stocks wrapped their worst week since June on Friday, with the S&P 500 finishing down nearly 2%. The Cboe Volatility Index touched its highest intraday level since April but closed at 19.4.

Why it matters

Asset managers appear to be selling stocks outright rather than buying options to protect against further declines, a shift that reduces net market exposure. Morgan Stanley data shows global gross equity exposure among long-short active managers has fallen 8% from its recent peak, the largest drawdown in at least ten years.

The Cboe Volatility Index closed at 19.4 after moving 2.2 points on Friday, its highest intraday level since April, while the S&P 500 finished down nearly 2%. Morgan Stanley data shows global gross equity exposure of long-short active managers is down 8% from its most recent peak, though the duration of this de-leveraging remains unclear.

The players

Charlie McElligott

Nomura analyst who commented that traders are not hedging with S&P 500 index options at this moment.

Zed Francis

Chief investment officer at Convexitas, based in Chicago, who attributed quiet implied volatility to long-short managers de-levering toward cash.

SpotGamma

Options analytics firm whose study of 126 selloffs since 2018 projected a larger VIX move than was observed.

Morgan Stanley

Global investment bank whose data tracks gross equity exposure across long-short active managers worldwide.

The details

Traders are not buying S&P 500 index options at this moment, according to Nomura's Charlie McElligott, and implied volatility has stayed comparatively quiet as long-short managers reduced exposure and moved closer to cash, per Convexitas CIO Zed Francis. SpotGamma's analysis of 126 selloffs since 2018 suggests the VIX should have jumped closer to 2.6 points, a move that did not materialize.

- June 2026: Last time stocks had a worse weekly performance.
- October 16, 2026: Sell-off raised volatility on Nasdaq 100 put contracts between 20% and 50% out-of-the-money.
- November 2, 2026: Stocks wrapped their worst week, with the VIX closing at 19.4.

Market Dynamics

The de-leveraging follows the October 16 sell-off, which left Nasdaq 100 put contracts between 20% and 50% out-of-the-money more expensive on a volatility basis. The 8% drop in global long-short gross exposure, the largest in at least a decade, marks a sharper break from prior positioning than the earlier episode.

Investors holding equity index funds face the prospect of continued volatility as managers reduce exposure rather than hedge it with options. Those managing personal portfolios may watch whether the VIX sustains levels near 19.4 or retreats as positioning stabilizes.

The takeaway

Sharp drops in exposure can unfold faster than options-based hedges adjust, so watching both volatility readings and fund positioning gives a fuller picture of market risk than either alone.