Amid renewed U.S.-China trade tensions and concerns over Korea-U.S. tariff talks, volatility in Korea's KOSPI has risen to the highest level in about four years. As sensitivity to domestic and external factors increased, intraday volatility became extreme.
According to the financial investment industry and Korea Exchange on the 19th, the KOSPI's average intraday volatility for October (1–17) stood at 1.81%. On a monthly basis, that is the highest level since Feb. 2021 (2.03%), a gap of four years and eight months.
Intraday volatility is the ratio of "the difference between the day's high and low" divided by "the average of the high and low." It shows how large the index's fluctuation range was relative to the day's average of the high and low; the wider the index's intraday swings, the higher the value.
By day, the KOSPI's intraday volatility, which had mostly stayed below 1% through the end of last month, jumped to 1.52% on Oct. 2 and has been on an upward trend. On the 14th, intraday volatility surged to 3.10%, the highest since Aug. 7 last year (3.29%), and has since remained around 2%.
The "KOSPI200 volatility index (VKOSPI)," known as Korea's fear gauge, is also soaring sharply. VKOSPI measures the market's expected future volatility reflected in option prices; it usually rises when the KOSPI plunges, but it also climbs in uptrends when investor anxiety and stock market uncertainty are high.
As of the 17th, VKOSPI was at 34.58, up 15.69% from the previous day. That is 67.7% higher than at the end of last month (20.62) and the highest since Apr. 8, when U.S. President Donald Trump's reciprocal tariff announcement rattled global markets, at 37.83.
Experts advised adjusting portfolios to prepare for risk. In a report on the 17th, Jeon Gyun of Samsung Securities said, "VKOSPI in the 30% range is a level warning of investment risk. Calls have had a stronger impact than puts, reflecting caution over upside risk," adding, "Because investment revenue and risk have both risen, there is a need to pay close attention to risk management."
A put option is the right that gains when stock prices fall, and a call option is the right that gains when stock prices rise; the stronger influence of calls means investors are wary about a rise in stock prices and buying has strengthened.