Hedge Funds Shorts Match October With VIX Near 26

The selloff that erased $1.78 trillion from American equity values has pushed the cost of options to the highest levels of 2012 and prompted hedge funds to add to short sales at the fastest rate since October.

The Chicago Board Options Exchange Volatility Index surpassed 26 last week, a level not seen since December. The gain left the gauge near its price just before the Standard & Poor’s 500 Index slumped 12 percent in August and September 2011, data compiled by Bloomberg show. As the VIX has risen, an International Strategy & Investment Group measure of hedge fund bullishness has retreated by 7.4 percent.