While it has historically been positive, October has the distinction of being known as the most volatile month of the year.  What that means in a year where volatility has been non-existent remains to be seen, but if the market was going to become more unsettled at some point, history says that now is the time.  Today, we wanted to show two examples of how volatility tends to spike during October.  In terms of the S&P 500’s average intra-month range, going back to 1928, the percentage spread between its closing high and low during the month of October has been a staggering 8.30%.  That’s more than 1.3 percentage points above the next highest month (November – 7.0%).  After October and November, though, volatility really recedes with an average spread of only 5.26% in December.

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As shown in the chart above, February and December tend to have the smallest intra-month ranges, but February also has the fewest amount of trading days as well, so that skews things.  Another way to look at monthly volatility on a more apples to apples basis is by measuring the index’s average daily percentage move (up or down) during each trading day of the month.  Using this approach, the picture is very similar; volatility tends to pick up in September, October, and November and then fades in December to close out the year.  Once again, October sees the largest average daily percentage move at 91 basis points (bps).  In other words, the S&P 500 has historically averaged moves of close to +/-1% on trading days throughout the month of October.  The key difference between this chart and the one above is that on this basis volatility in February is right inline with the other first eight months of the year.  In fact, it’s pretty striking how average daily volatility tends to be so uniform for the first eight months of the year before going haywire in the final third.

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