The KOSPI recently topped 4,000 for the first time ever and has continued its rally, but bets on stock volatility have surged, flashing warning lights, Bloomberg reported on the 12th (local time).
According to Bloomberg, the "KOSPI volatility index (VKOSPI)" jumped to levels seen in April when U.S. President Donald Trump announced a reciprocal tariff and the market plunged. The index soared to 44.23 on Apr. 7 right after the reciprocal tariff announcement before falling to the high-10% range, but it has recently been hovering around 40.
Bloomberg noted that this rise in the KOSPI volatility index is unusually differentiated from relatively calm markets elsewhere, and as a result the gap between this index and the Chicago Board Options Exchange (CBOE) Volatility Index (VIX) has widened to its largest since 2004.
The KOSPI index has risen 71% so far this year and is expected to post the biggest annual gain since 1999. It is the highest increase among global stock markets, and the annual gain of the KOSPI 200 index, which groups blue chips such as Samsung Electronics and SK hynix that led the rally, amounts to 83%.
Jun Jeon, a derivatives analyst at Samsung Securities, said, "The level of the KOSPI volatility index reflects investor anxiety as the KOSPI has reached a historic high," but added that it does not mean a market correction is imminent. However, "Expectations for the rally have become excessive, and call options appear overpriced," Jeon added.
Citing its own data, Bloomberg said the prices of both call and put options have risen, and in particular, the implied volatility of one-month call options that bet the KOSPI 200 will rise more than 10% is above the recent one-year average.
The KOSPI fell 3.7% last week, marking its worst weekly drop since April, while foreign investors were net sellers of about 1.65 trillion won in futures linked to the KOSPI 200 index. The KOSPI has rebounded over the past two days but is currently down 2.9% from the Nov. 3 peak.