Today (including last night futures trading) was a unique event for sure. I really don't know if backtests are that meaningful on this situation.
My feeling is that despite that big drop in implied volatility, there will still be choppy/volatile type trade in coming days.
For instance here a look at forward MAX gains and losses across time frames following a day where the VIX drops more than 20%.
Click on Chart to Enlarge
There were only 10 instances going back 21 years. But see that there were some big decliners to follow. The skew was quite negative. I had showed the
stats on the VIX being down more than 15% in a post a couple days ago. It showed that about 2/3 of the time prices closed lower 7 trading days later. Well in the VIX down more than 20% scan here, the average closing price 8 days later was down nearly 3%. That was helped down by a couple big instances in October 2008 which were in the thick of the most volatile time in history.
Anyway, the reasons for very high volatility and erratic moves in the VIX may be varied. But on average there were some choppy situations ahead. And based on the averages and MAX loss values on a closing basis following these signals, it would suggest that prices could trade lower into late next week.
I am not making any further buys or sells at this point.
Pete
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