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Most traders see a VIX explosion and immediately think about protecting themselves. Cutting positions, tightening stops, moving to cash. And look, I get it — the instinct makes sense.
But here’s what the data actually shows, and it’s worth paying close attention to…
The VIX spiked 39% in a single day on Friday, June 5, while the S&P 500 (SPY) fell over 2.5%. That kind of fear reading doesn’t happen often — and historically, it’s been one of the best signals to start leaning in, not backing away.
What the Numbers Actually Say
When I ran the historical data on occurrences of VIX spikes like June 5’s, the results were striking. Over the next 10 days — buying Monday and holding through Wednesday of the following week — SPY has gone higher 71% of the time.
Compare that to a typical week, where your win rate on SPY runs somewhere around 54-56% and you start to see why these setups matter.
Extend the window further and things get even more compelling. Over the next month — from Monday through 30 days out — SPY has gone higher 86% of the time. That lines up with what we’ve seen during other periods of sharp volatility spikes, where initial fear-driven selloffs often give way to steady recoveries as conditions normalize.
These moments tend to compress fear quickly and then release it just as quickly, with markets finding their footing faster than most traders expect.
You might notice the average return over that period is negative — but that’s not the full story. The downside outliers are extreme: The worst drop was 24%, while the max upside was 5%. Those severe drawdowns pull the average down, but the median — which tells you what most of these setups actually looked like — is solidly positive.
And then there’s the longer-term picture, which is even more telling. At six months, the win rate is 100%. At nine months, 100%. At 12 months, 100%. Every occurrence. These aren’t short-term blips — they point to a pattern where fear-driven selloffs set the stage for meaningful rebounds, provided you’re willing to give the trade room and time to work.
One thing I want to be transparent about: This analysis is based on a sample size of seven occurrences. It’s not hundreds of data points. But the consistency across those instances — especially over longer windows — is hard to ignore.
Fear Is a Signal, Not a Stop Sign
Here’s the core takeaway: When fear is rising, it’s typically time to start buying — and this data is another chart reinforcing that. I’m not saying throw caution out the window. Position sizing, managing risk and staying disciplined still matter enormously.
But letting fear drive you out of the market entirely, right at the moment when these setups historically have the highest win rates? That’s a costly mistake.
The data doesn’t guarantee anything. That 24% worst-case drop is a reminder that tail risk exists. But if you’re looking for a framework to guide decisions when the market is in full panic mode, the statistics here highlight something important…
Markets have shown a remarkable tendency to not only recover from these volatility shocks but move meaningfully higher over time. Strategic patience, not emotional reaction, has been the winning approach far more often than not.
Stay disciplined, manage your risk and trust the process.
Graham Lindman
Graham Lindman Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.Â
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