The Chicago Board Options Exchange Volatility Index slid 8.5 percent Thursday to 12.11, extending its five-day decline to 39.4 percent. That’s the biggest decrease in the VIX since it began in 1990, according to data compiled by Bloomberg.

Investors are getting used to the pattern: a crisis arrives, this time from Greece, the market trades erratically for a few weeks, and then volatility plunges as the concern recedes. Half of the 10 biggest five-day declines in VIX history have occurred since the beginning of 2013, according to data compiled by Bloomberg and MKM Partners’ Jim Strugger.

“The VIX flared up and fell quickly because the world got scared, but this too shall pass,” said Sean Heron, who helps oversee $30 billion for Glenmede Trust Co. “People are very quick to sell out of decaying volatility. The sellers feel more brazen and the buyers feel more reluctant.”

The VIX dropped Thursday as the Standard & Poor’s 500 Index climbed 0.8 percent. U.S. stocks have gained 3.6 percent in the past five trading sessions, the most since December. It’s been 3 1/2 years since any decline in the S&P 500 exceeded 10 percent.

Sudden Relief

Equities rallied as Greek lawmakers passed a bailout agreement that keeps the country in the euro for now. The deal provided further relief to traders who had been bracing for Greece’s exit from the euro after months of negotiation between the country and its creditors. The VIX had climbed 65 percent in a little over two weeks, with most of the spike occurring on June 29 as Greece shut banks and imposed capital controls.

Stabilization in Chinese equities after a rout also soothed investors, who sought protection amid concern the weakness could impact U.S. companies with international sales. The Shanghai Stock Exchange Composite Index endured a 32 percent selloff that began last month.

“Though spot VIX did manage to rise above 20 intraday last week, the overall intensity of this event fell short of our expectation,” Strugger, a derivatives strategist at MKM in Stamford, Connecticut, wrote in a note Thursday. “The swiftness of the volatility unwind and rip in the S&P 500 right back toward its all-time high has been notable.”

Before this latest round trip, the VIX’s biggest comparable five-day drop was over two years ago. In January 2013, the gauge lost 39.3 percent, or 8.9 points, over five trading sessions as lawmakers passed a bill averting spending cuts and tax increases known as the fiscal cliff.

Anxious Traders

Investors have rushed into S&P 500 hedges this year at any sign of trouble. Their herd mentality has resulted in bigger- than-normal gains in the VIX, in part because the volatility gauge has spent most of the year hovering around 15, below its historical average of 20.

While options traders have unloaded their protection, large speculators in S&P 500 futures are keeping theirs. In futures tracking the broad-market index, bearish positions outnumber bullish ones by the most in three years, according to data compiled by Bloomberg and the U.S. Commodity Futures Trading Commission.

Contracts on the volatility gauge expiring July 22 ended Thursday at 12.93, 6.8 percent above the VIX’s closing price, according to data compiled by Bloomberg. Contracts expiring in August closed at 14.48, while September futures ended the day at 15.43, the data show.

“Clearly, for whatever reason, the market thinks Greece is a non-issue in the near-term,” said Dominic Salvino, a specialist on the CBOE floor for Group One Trading LP. “When the deal reached the table, that’s when volatility started coming in hard.”