Tech earnings last week sent Nasdaq into a 10% correction before bouncing into Friday close. Broad market, however, somehow only 1% off ATH half way through Monday… Endless ‘peace deal’ headlines keep knocking oil lower only to see it recover the following days. It feels like the rotation from tech into broader market is heavily relying on interest rates heading lower (as a result of lower energy prices) even as the consumer looks to be weakening after years of inflation. Apple is set to report earnings after market close on Monday, US midterm results should come up premarket on Wednesday & we’ve got NFP on Friday so another busy week before markets enter autopilot into end of year holidays.

SPX weekend straddles went out at highest levels since late August (~90bps). Rolling 1-DTE VRP in negative territory on a 3-month rolling basis. SPX ATM straddles lost ~25% just when futures re-opened on Sunday. Absolutely vicious desire to sell any uptick in implied volatility…

Gold & Oil implieds trading well above their 5Y averages, rest of assets back towards their 2Y & 5Y averages. Heading into midterms we saw an uptick in cross asset vols since early September. There is definitely no panic yet in markets, however, as we know markets don’t tend to crash from highs, instead we are seeing vol building up before markets potentially take the next sharp leg lower (whether its on more bearish AI news or Iran war escalating.)

SPX 25d skew whipping around last few weeks, closed friday near 6 month highs, however, put skew less steep relative to the initial drop on Oct 16th. So far little interest in calls, likely driven by washout in tech names.

% of stocks with inverted skew also down to 2 year lows…

Looking at intraday price action:

SPX 1-DTE short straddle pnl net down if unhedged, short delta hedged hourly performance still net up on the week. The moves have been extremely ‘trendy’ last week so net pnl +ive from the delta hedge.

Looking at the straddle cross section, market trending through entire day up until last hour where we have seen strong mean reversion into the close. Feels like intraday moves are largely front running the levered tech ETF rebalance, with final hour unwind of the trades.

Realized Volatility Overview

SPX hit roughly 3% drawdown from highs, led by the tech basket. RSP closed the week just 1% off ATH as investors rotate from tech into defensive sectors.

Seeing small uptick in realized volatility measures in SPX. Realized still lagging implied by a record margin. Intraday range based measures not reacting much as price action continues to be very orderly.

Equal weight SPX (RSP) continued to show relative strength last week as tech sold off. Short dated implied correlations continue moving higher, peaking slightly above 20% on Friday near lows. Average stock implied volatility (VIXEQ) trading back above 40% even as earnings conclude.

VIX futures spiking again last week, however, with Nov/Dec contracts already elevated during the summer the damage to ETP’s so far is negligible. We’ve got a few key events this week with term structure going flat into them. We still have not seen any ‘panic’ in indices even as certain baskets are in double digit drawdown territory.

SPX ATM Straddle Performance

1-DTE straddles managed to close up ~30pts on the week. Straddles opened at US cash open net down ~60pts… Strong mean reversion into the close keeping a lid on implied vols blowing out. Straddles opened 1pm lost ~100pts on the week, losing money every single day.

Intraday Variance Ratio

From the following post:

Bias long straddles going into start of week. Variance Ratio hitting extremes on intraday mean reversion into end of week. This is mostly the result of last hour moves retracing large chunk of intraday price action.

VX Carry & SPX Overlay

From the following post:

Lots of whipsaws in VX again last week… Triggered back short Nov contract on Tuesday, held through Thursday and triggered out by open on Friday. Triggered back in short Friday close and triggered back out midday through Monday. Spot VIX above all VX contracts going out to June 2027 so far unless we get another stick save into close (which is likely given the recent pattern.) Likely will stick to cash next few days as we go through midterms & Apple earnings. This is a pretty decent exit with only ~10% dd on the pnl.

As always, don’t hesitate to reach out if you have any questions / suggestions!

Have a great week!

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September saw last 10 min end of month straddles cheap once again at ~10bps, with end of month straddles getting cheaper for over a year now.

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Packed Wednesday for markets, starting with SK Hynix earnings (stock up on buybacks), then FOMC & Google/Microsoft (8 trillion $ in mkt cap combined) earnings after close.

Markets set firmly on ‘no change’ for tomorrows decision, down from almost 65% chance for a hike a month ago. Since then, Brent up another 5-10$ with US10Y & US30Y unchanged. Inflation continues to be the dominant issue not just in US but globally, with consumers facing higher energy bills going into winter. Iran situation continues to be unresolved & Russia recently affirmed its desire to continue the war in Ukraine despite achieving nothing in the last 3 years except rising casualties.

~60bps SPX straddle for tomorrow, well below the last 3 meetings, perhaps on expectations that rates will remain unchanged.

Updated 1-DTE & Intraday SPX Straddle performance:

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Markets took a leg lower into end of last week after initial bounce. META & TSLA earnings on Wednesday reignited AI spending & debt concerns. Brent settled the week near YTD highs as situation around Iran continues to be uncertain. While NDX & Small Cap indices approach double digit drawdowns from highs, SPX is barely 2-3% off highs with defensive sectors advancing over last month. We’ve got a packed week ahead with FOMC & majority of the heavy weight trillion $ mkt cap companies reporting earnings.

SPX weekend straddles went out on Friday at ~80bps, upper end of the 6 month range. Rolling 1m VRP holding positive so far but still extremely thin.

Cross asset implied vols up across the board last week. Bond volatility relatively highest on 2Y lookback. Lots of catalysts, oil/rates/AI in some way affecting all cross asset implieds.

SPX 25d skew eased into start of week but saw steepening once again into end of week.

Large spike in the tails as tech weakness sparks concern for broad based sharp market decline.

Looking at intraday price action:

Realized volatility picked up since last Friday, short hedged/unhedged SPX straddles both down last week. Lots of ‘two-way’ action intraday, nice change from the ‘pinned’ market we’ve been seeing over last few months.

Looking at the straddle cross-section, momentum through London close saw a slight pullback last week but nothing major. Last hour mean reversion nearing YTD lows. Overnight straddles continue to bleed lower with first hour seeing some mean reversion of the overnight session.

Realized Volatility Overview

Overnight SPX performance ~flat over last month, US cash session continues to drift lower. Outside the April squeeze, almost a year and a half of sideways action in SPX despite the wild swings in sectors within the index.

Slight jump in realized volatility across measures. Intraday range based measures slowly inching back towards 10, cl-cl vols leading higher as well. So far dispersion still keeping a lid on realized vol but we’re starting to see hedging demand for a corr=1 style correction.

Over last 2 weeks Mag7 basket pulled back ~7% sending NDX back towards 6 month lows. Equal weight SPX (RSP) relatively strongest, only down few % from ATH. Short dated implied correlations jumped from single digits towards 10-14% but still remain near two decade lows. Average component implied volatility (VIXEQ) trading ~42, almost double the pre 2020 levels. We’ve seen last few weeks how sharply VIX reacts to any changes in the heavy dispersion environment. A brief correlated selloff in equities pushed VIX ~7pts higher as traders reach for deep OTM hedges and correlations reprice.

After months of smooth sailing the short VX trade finally seeing some weakness. SVXY gave up few months of upside grind in just a few days. Term structure now flatter ~20 all the way to June 2027. There’s been almost no downside in VX during US cash session for almost 2 years now… Almost all the drops in VX purely driven by overnight session.

SPX ATM Straddle Performance

1-DTE straddles net down ~10pts last week, straddles opened at US cash session open down ~75pts. Straddles opened in the 2nd half of the day all down anywhere from 20 to 60pts. Last 10 min straddles net up ~6pts. Short dated implied vols jumped slightly but realized still lagging.

Intraday Variance Ratio

From the following post:

Heavy mean reversion intraday last week. Bias towards long straddles to start the week after some extreme mean reversion prints Thursday/Friday. Packed eventful week with end of month falling on Friday. Bias into FOMC is trend higher but given over 90% odds for no rate changes the focus should fall on remaining Mag7 earnings and the fate of AI trade.

VX Carry & SPX Overlay

From the following post:

Few nasty whipsaws last 2 weeks. Signal remains cash, triggered back in on Tuesday but whipsawed on Thursday as markets sold off into the weekend. So far into Monday still no bias towards short but likely will see another short trigger tomorrow if markets hold onto gains and VX continues to drift lower. As mentioned in last weeks note, not much damage so far to the short VX trade as term structure has already been extremely steep in the front, cushioning the index drop.

As always, don’t hesitate to reach out if you have any questions / suggestions!

Have a great week!

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Updated historical performance for…

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Hot CPI & PPI prints last week sent equities considerably lower into end of week. Decline led by tech names with broad market (thats already beaten down) down as well. Credit concerns surrounding data centers likely contributed to the decline. VIX saw a nasty move higher as SPX skew steepened significantly. With earnings season in full swing this & next week, dispersion is trending higher with implied correlations sitting ~10% with a brief spike towards 13-14% on Friday. META earnings on the 21st should set up expectations for hyperscalers going into end of year.

SPX weekend straddles went out into the weekend ~70-80bps, not even 1% despite the selloff in tech on Friday. Rolling 1-DTE SPX VRP inched into negative territory but not by much on Friday.

Outlier in cross-asset implied vols last week was equities VIX. Very sharp rise relative to the benign 1% drop on Friday in SPX. Oil/Gold vol continues to trade sideways even as prices drift higher. Yields stabilized early in the week after hitting new highs during the prior week.

Very sharp steepening in SPX 25d skew, huge jump in SPX put demand. This led to SPX put skew steepening to peak levels over last 2 years. Very outsized reaction relative to the move we saw on Friday.

Looking at intraday price action:

Short unhedged SPX 1-DTE straddles pnl slightly down on the week, hedged short straddle pnl slightly up. Moves on Wed/Thu/Fri quite trendy, bumping delta hedge component pnl higher, enough to offset the losses from the short straddle. Short dated implieds jumped higher after Fridays move, however, half way through Monday we are once again seeing extreme dispersion with tech names higher while broad market continues to trade down. Net result is SPX largely pinned intraday with implieds already dropping sharply.

Looking at the straddle cross section, the intraday momentum into London close continues to persist. This is a considerable change as mean reversion into London close has been very stable since ~2020/2021. There’s also no offset in any of the following periods except some last hour mean reversion.

Realized Volatility Overview

SPX closed Friday with a 2% drawdown from ATH. Given the bloodbath in broader market, SPX held up exclusively by the Mag7 basket which is also trading just a few % off ATH.

SPX realized volatility measures barely budged on the drop in SPX. VIX currently trading at a massive premium to trailing realized…

Looking at US equity indices, the extreme dispersion is apparent. Dow saw bid last week relative to tech / small caps as market participants reach out for defensive sectors. As large cap tech dropped on Friday, investors urgently reached for corr=1 selloff hedges in SPX. So far it looks like hyperscalers are holding well into Monday, pushing VX ~2pts lower. Until large cap tech reports earnings we are likely going to continue to see extreme dispersion into Nov.

Short VX trade saw the steepest drop since Feb/Mar. So far VX drifting lower on Monday as Mag7 basket trades ~1% higher from Fridays close.

SPX ATM Straddle Performance

US cash session straddles up ~95pts last week. Overnight straddles red every single day, losing ~40pts on the week. Despite the overall positive performance in SPX YTD, rolling 1-DTE calls over last year has net lost ~12bps (see this post.) When looking closer, the entire advance in equity indices came in just a few key periods… The rally from mid April to early June & then a few days around end of month / beginning of month in August account for almost the entire positive performance. Outside of these 5-6 weeks, equity indices have been drifting sideways / lower for entire year with extremely sharp vertical ramps into key periods.

Intraday Variance Ratio

From the following post:

Bias slightly towards short straddles going into start of week. Wed/Thu/Fri saw very ‘trendy’ moves intraday, however, downside ‘trendiness’ still continues to be negligible relative to the few extreme upside moves we’ve seen…

VX Carry & SPX Overlay

From the following post:

Cash signal triggered on Friday when basis narrowed sharply after London Close. Not too much damage done as extreme spread we’ve seen providing comfortable cushion. So far on Monday, despite the bounce and term structure normalizing, still no short signal triggers. Jan/Feb contracts have barely budged on Fridays selloff with all the damage concentrated in the front 2 contracts. Looking for front month basis to widen again before jumping back in short into end of year.

As always, don’t hesitate to reach out if you have any questions / suggestions!

Have a great week!

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Monthly Return & Sharpe Dashboards:

Colour scheme: Highest sharpe/return in green, lowest in red. Colour scheme is split per lookback column across bullish/bearish/neutral structures.

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SPX CPI straddles trading at ~50bps going into Wednesday. One of the cheapest CPI straddles going back almost 7 years! Feels like market has accepted 4% inflation & expects record low sector correlations to keep things steady into year end.

Historical SPX Options Performance:

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SPX closed the week at new ATH’s. Under the surface, however, strong dispersion continues to persist. Tech underperformed relative to broad market after OpenAI revenue ‘miss’. So far the reversion in performance dispersion is small, RTY continues to trade ~9% off the August highs. Rates/Oil stabilized but still sitting near highs of the year. CPI this week is the main event before FOMC & tech earnings last week of the month.

SPX weekend straddles went out at ~40bps, near record lows… Fridays volumes basically matching a shortened holiday session. 1-DTE rolling VRP sitting ~0 for the last 3-4 months as option premiums fell along with realized volatility.

Cross asset implied vols down across the board last week. Trump signaled no strikes on Iran before the midterms (which is essentially a just a pause as the statement implies escalations likely resume once midterms pass…) Equity vol eased as well as implied correlations fell going into earnings season.

SPX 25d skew slightly steeper on the back of put demand, however, heavy dispersion and zero follow through on the downside in the index basically removes any serious panic.

Looking at intraday price action:

Net 1-DTE short straddle performance ~flat for both hedged/unhedged strategies. In general theres just no action to speak of… This has been quite a long stretch for markets without any considerable index downside. We have not seen a 1% down day in months and with all the careful headline management going into midterms its likely the administration is in full on ‘damage control’ mode until late November.

Looking at the straddle cross-section, only thing that stands out following the April lows is the lack of mean reversion into London Close. One of the most persistent patterns of the last 10 years has reversed and we have seen continued follow through into London Close with the hour post London Close seeing mean reversion instead.

Realized Volatility Overview

Flattish performance last week for both overnight/intraday sessions. Intraday performance topped ~ early June and has not recovered since. Past year almost nothing added in cash session with ~20% added during Globex session.

Realized volatility measures holding <10 for both 1m & 10d lookbacks.

SPY/QQQ/IWM clearly showing the dispersion going on since early September. Broad market back at May levels while Tech making new highs into Oct. With earnings season approaching, 1m implied correlations are dipping towards low single digits, dragging VIX along with it.

Vol ETP’s stalled last week but short vol performance continues to sit at YTD highs. VX term structure slowly dropping as we approach midterms, Nov/Dec contracts now trading 17/18s, down from 19/20 a month earlier. Still a huge premium to spot so lots of ‘potential’ roll going into end of year.

SPX ATM Straddle Performance

1-DTE SPX straddles gained ~17 pts last week, almost exclusively during the overnight session (overnight straddles net up ~3pts on the week.) Straddles opened at the beginning of US cash session down ~36pts. All of the end of day straddles net down anywhere from 30-40pts. Last 10 min puts continue to perform well, net up 3pts on the week and up ~50pts since start of Sep.

Intraday Variance Ratio

From the following post:

Variance Ratio back around 1 so no bias going into this week. With heavy dispersion markets largely flat intraday and without a corr=1 shock that sends people towards bonds we should continue to see rotation.

VX Carry & SPX Overlay

From the following post:

Short VX Oct positions continue to hold. With expiration next week and still ~2pts premium to spot in Oct contract, CPI is likely to send Oct contract much lower if its not a disastrous print. Recently we’ve seen front month VX contract hold the premium right into expiration, moving lower only days before expiration. Seeing some extreme prints in signal values, have not seen realized volatility of VX this low since Oct 2018 & such a large premium holding into vixpiration. This is not at all imminently bearish as each prior time we’ve had months before any meaningful downside materialized (Oct 2018 was a small exception as we had a large down day the very next day but markets remained choppy up until Christmas where SPX reached 15% dd.) This continues to be one of the best runs for the short VX trade in past 5 years with still very attractive setup into end of year should markets hold together through midterms.

As always, don’t hesitate to reach out if you have any questions / suggestions!

Have a great week!

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Monthly Return & Sharpe Dashboards:

Colour scheme: Highest sharpe/return in green, lowest in red. Colour scheme is split per lookback column across bullish/bearish/neutral structures.

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SPX finished the week exactly where it opened on Sunday. Market kept drifting lower into Thursday as yields kept making new highs. Thursday midday saw markets bounce after soothing remarks from Fed members about ‘patience’ regarding further rate hikes. Friday NFP number came in below expectations, sending indices ~2-2.5% higher off Thursday lows, however, yields reversed back higher towards end of day despite equity buoyancy. Rate hike expectations have shifted significantly lower for Dec meeting following Fed comments so likely the reason for sharp equity bounce. We’ve got more employment data coming out this week but the CPI number comes in the week after. So far mkt cap indices continue to trade in a tight range with tech sector keeping indices pinned as breadth deteriorates to some of the worst levels we’ve seen over last 20 years.

Despite implied vols in credit surging, SPX weekend straddles went out ~50bps, still near lows of the daily ranges. 1-DTE trailing VRP back to slightly positive as index continues to stay roughly pinned.

Credit vol leading cross asset implieds higher. Equity vol now cheapest on relative basis for the first time since a few brief periods in 2023/2024. WTI oil slipped last week relative to Brent as European agencies agreed to release emergency reserves.

SPX 25d skew steepened slightly last week but no reach for puts so far. Large majority of tech sector continues to trade with inverted skew as broad market sits in a 5-7%+ drawdown.

Looking at intraday price action:

Unhedged short straddles gained last week as markets largely pinned on a cl-cl basis. Delta hedged short straddles ~flat as markets reversed sharply intraday a few times. After the gains during March, 1-DTE premium has been extremely thin, pnl going nowhere for 6 months now.

Looking at the straddle cross section, only period intraday gaining lately is the US session first hour of trading, after which the initial move got mean reverted further into the trading session.

Realized Volatility Overview

US overnight performance hit new highs again last week, cash session continues to drift lower.

Short dated realized cl-cl volatility caught down to range based vol measures. Realized volatility firmly below 10 across short dated & monthly measures.

Performance dispersion clearly visible in the market cap weighted vs equal weight weighted indices. 1m implied correlation dropped last week even as component implied vol rose slightly (VIXEQ). As we enter earnings season, look for VIXEQ to rise further. Given the current market reaction on small drop in yields, likely see a large squeeze in broad market if Treasury manages to get a meaningful bid in bonds going.

VIX Futures continue to display a more exacerbated version of S&P performance, overnight drops lower with flat / slight bid in US cash session. Term structure continues to be steep in the front, with ~3pt premiums to Dec/Jan contracts.

SPX ATM Straddle Performance

1-DTE SPX straddles lost ~74pts last week, followed by ~60pts loss for straddles opened at US cash session start. Notably, last 10 min SPX performance has been extremely negative over last 10 trading days even as indices bounce into eod. Sep 30th saw one of the larger moves down in the last 10 mins, with SPX trading lower by ~50bps.

Intraday Variance Ratio

From the following post:

Bias back towards long straddles to start the week as we saw heavy mean reversion throughout the week. There have been a few instances of extreme trendy behavior intraday since start of August. This is likely exacerbated by heavy dispersion we see last few months. Tech bid remains persistent but when broad market gets squeezed higher on a headline / event we see some of the trendiest price action on the way up with seemingly zero pullbacks.

VX Carry & SPX Overlay

From the following post:

Short vol signal continues to hold. This is almost 2.5 months straight without coming even close to an exit from the short VX trade. As I mentioned before, post April this has been one of the best runs in short VX trade in a decade. Relentless bid in tech even as broad market declines is the main culprit… Until we see the AI trade slow down, short VX should continue to perform extremely well. Lack of follow through on downside & explosive moves to the upside in indices is the theme of last 6 months.

As always, don’t hesitate to reach out if you have any questions / suggestions!

Have a great week!

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Similar setup to Sep NFP, a hot print sends us lower on the day, market looking for a cooler print to not give up the overnight rally. Sep print came in nearly double the expectations sending markets slightly lower but the reaction was well below the JPM forecast.

Final revisions continue to come in negative, only a handful of months since 2021 with positive final revisions…

SPX straddles for NFP traded ~65bps last night, highest since March when we had overall volatility levels much higher.

Historic NFP data (from https://www.bls.gov/web/empsit/cesnaicsrev.htm):

Final revision sum:

Overnight SPX Straddle performance:

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Two headline saves on Thursday / Friday with indices drifting lower with US yields spiking to new highs. Broad market getting pummeled with average stock down ~10% from highs. Mag7 basket, however, is keeping indices pinned as its up ~10% from Sep start. Lots of parallels drawn between now and 1999/2000 as breadth collapses but large cap tech continues to show relative strength. Lots of econ data this week, GDP on Wed & NFP on Friday along with ~18 different Fed speeches…

SPX straddles went into the weekend just above 50bps as short term correlations continue to trade around single digits. 1-DTE VRP dropped to negative for both 1m & 3m rolling windows. Sporadic moves as oil is largely driving yields and consequently broad market. We continue to see the same Iran headlines we’ve seen for the past 6 months… Ceasefire is supposedly right around the corner yet we continue to see occasional headline of a new ship either hitting mines or being hit with missiles.

Most concerning part of cross asset implied vols last week is credit vol spiking sharply. Spike in yields driven entirely by real level of financial conditions tightening and now inflation expectations. Equity vol is now at the lowest relative level to other asset implieds in a while… Immense faith in tech continuing to provide uncorrelated performance relative to broad market.

Looking at SPX 25d skew, actually seeing flattening as call demand perks up without any put skew steepening. Looking beyond index level skew, CBOE comments on the underlying extreme bullishness in AI related sectors:

Looking at intraday price action:

1-DTE unhedged short straddles slightly down last week after Mondays huge rally right off globex open. Delta hedged short straddles performance continues to be sluggish as tight premiums on the back of record low implied correlations leave very little ‘meat on the bone’.

Looking at the 1-DTE straddle cross-section, acceleration into London Close continue to persist. Headlines on Thursday/Friday coming in right when 10Y yields hit 5.2% level sent indices back to flat/green on the day… Half way through Monday, however, we are back at the same levels where the Thursday headline came out… These headlines keep looking like attempts to ‘manage’ the bleed before any constructive Iran deal surfaces and sends oil lower and yields along with it.

Realized Volatility Overview

The ‘overnight bull market’ continued last week… US cash session has added almost nothing to index gains in ~ a year now. Drift higher overnight met with selling through London Close only to be rescued by a headline into close.

Divergence between cl-cl rvol measures & intraday range based vol measures continued last week. Cl-cl rvol gradually rising but intraday range based rvol remains sub 10 for 10d & 1m lookbacks.

Equal weight SPX more acutely shows the US session weakness with only large cap tech bid during US cash session.

Mag7 basket hit new highs last week, highest level since Oct 2025. Short dated implied correlations continue to trade mid single digits, keeping VIX near 2 year lows. Going into earnings, likely to see single stock vol move higher as yields put pressure on specific sectors.

Systematically rolling VIX futures shorts continues to do well. US cash session lately seeing a slight bid but overnight performance continues to inch higher.

SPX ATM Straddle Performance

1-DTE straddles net up ~35pts last week, straddles opened at US cash session open net up ~82pts over the same period. We’ve seen large moves higher around lunchtime with markets trading flat into the close… Straddles opened ~1pm lost ~50pts and closed down every single day last week.

Intraday Variance Ratio

From the following post:

Last Monday saw some extreme trendy price action, highest since the early August squeeze higher:

Bias towards short straddles going into Monday & next few days.

VX Carry & SPX Overlay

From the following post:

Short VX Oct signal continues to hold into Monday. Short positions holding since late July, one of the longer stretches we’ve seen now of extremely steep contango in the term structure. Not much change w/w here as Nov/Dec/Jan contracts continue to trade at a healthy premium and dispersion continues to keep a lid on implieds.

As always, don’t hesitate to reach out if you have any questions / suggestions!

Have a great week!

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Monthly Return & Sharpe Dashboards:

Colour scheme: Highest sharpe/return in green, lowest in red. Colour scheme is split per lookback column across bullish/bearish/neutral structures.

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FOMC hiked rates 25bps last Wednesday, sending equities briefly lower before recovery into end of week. Broad market in ~5% correction on an equal weight basis, with Mag7 basket hitting Oct 2025 ATH into Monday morning. US yields & oil slightly lower even after another weekend of escalating tensions in the Middle East. Short VX trade continues to make out like a bandit as large cap tech bid keeps indices pinned despite broader market weakness.

SPX weekend straddles went out sub 50bps on Friday, near lows of the year. After brief drop on Sunday futures open, S&P futures up ~50 bps into Monday open in a straight line on a broad market bounce.

Implied volatility closed lower across assets last week following FOMC. Despite horrible breadth metrics (only ~19% of S&P500 constituents above their monthly moving average), VIX closing in near yearly lows as 1M implied correlations drop back to single digits.

SPX 25d skew flatter into end of week as vol deflated post FOMC. ATM vol down to YTD lows with put vol sticky as we head into seasonally weak period & midterms.

Looking at intraday price action:

Short SPX 1-DTE straddles both hedged / unhedged pnl peaked ~ June as the rally from April lows exhausted itself. Very thin premium in 1-DTE / 0-DTE options as short dated implieds hit decade lows.

We’ve seen some small weakness into first hour after extremely strong overnight sessions lately. After first few hours market just completely dies off into rest of day.

Realized Volatility Overview

Overnight performance YTD sitting at highs, US session continues to be weak since July.

Cl-cl measures higher, intraday range based vol at 2 year lows. Large overnight gaps following by drift lower into first half of the session is the prevailing theme.

Dow/Russell lower over last 1.5 months with tech keeping S&P pinned within few % off highs. Market saw weakness going into FOMC across the board but Thu/Fri and early Monday dispersion is keeping S&P500 completely pinned. With implied correlations falling ~10pts after FOMC & equal weight vol already down to mid 30’s after NVDA earnings in August, VIX is back to 14 handle.

Collapse in correlations after April is making VIX ETP’s pull 2017 style numbers over last 6 months.

SPX ATM Straddle Performance

Biggest losers last week are SPX straddles opened at US cash session, losing ~ 77pts. 1-DTE straddles down only ~26pts as main moves were the overnight gaps. Overnight straddles net up 28pts with overnight SPX calls up 65pts. Straddles opened after the first 30 mins of trading net down 30pts for the week & almost every single day.

Intraday Variance Ratio

From the following post:

Bias towards long straddles heading into Monday & likely for next few days as we’ve had extremely persistent mean reversion intraday over last week.

VX Carry & SPX Overlay

From the following post:

Short VX Oct signal held through last week despite a sharp selloff after FOMC. PnL is back to YTD high as equities bounced over last few trading days. Term structure continues to be very steep at the front, 3 point spread to Oct VX so far. Nov/Dec calendars steepening slightly but unlikely to move more until midterms. Nothing much to add… SPX barely moving few bps intraday so VIX futures will continue sliding lower…

As always, don’t hesitate to reach out if you have any questions / suggestions!

Have a great week!

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It looks like this time the window for a ‘relief rally’ is extremely narrow… A dovish hike is the most bullish scenario according to JPM, however, whatever Fed does tomorrow is unlikely to impact the energy situation globally. Russian war in Ukraine is unlikely to end near term, so strikes on Russian energy infrastructure are expected to continue. Similarly, tankers continue to get hit near Iran and no amount of tweeting is changing that.

~80bps straddle for tomorrow, same as July. Largest premium since Jan 2025 but a far cry from the 2-3% straddles we saw in 2022 during peak inflation scare.

Updated 1-DTE & Intraday SPX Straddle performance:

1-DTE

Overnight Straddles

US cash session straddles

1:59pm - Close (Decision Release)

Last Hour (Press conference impact)

Last hour SPX put cost %:

Last 4 meetings SPX ended deep red ~1.5% down on the day. Have not had a large up day since ~May 2025.

Last few meetings saw muted reaction into press conference start, large jump into conf start and strong fade into last hour…

Intraday Straddle Cost - Hourly

July reversal into last hour likely driven by liquidations in Situational Awareness fund that coincided with relatively hawkish press conference.

Post-FOMC Trend (Updated to Jul 2026)

Seeing some pickup in trend on FOMC day & day after over last 6 meetings (April & July saw extreme moves higher after a brief selloff on FOMC day.)

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Last week saw indices continue to bleed up until CPI on Friday. Yields & oil continued to trade higher all week with very little follow through to the downside in SPX. CPI came in roughly in line lifting indices higher. AI basket gapped lower over weekend as leading labs urge a ‘slowdown’ which would impact the capex driven growth cycle.

From the Hedging Efficiency post in Dec last year:

We are seeing this price action right now, with the inflation scare post Iran war driving participants away from bonds & into other sectors. Constant rotation keeping indices pinned despite decent corrections in some equity baskets.

FOMC & OpEx this week to look forward to. Almost 90% chance for a hike as of Monday open after CPI data, however, the political motif is strong into midterms so could see some serious jawboning during the press conference.

SPX weekend straddles went out ~50bps on Friday afternoon. Despite all the macro noise, SPX straddles even for the weekend are trading near lows of the 2 year range. Rolling 1-DTE VRP back to ~0 for 1m & 3m lookbacks.

Cross Asset implied volatility up across the board last week. Spike in ivols led by oil price jumping on new ME escalations. While Brent prices reaching near new highs, vols still relatively tame as traders price in less tail risk than in April.

SPX 25d Skew steepened last week as downside hedging picked up. Lots of hedging in VIX calls as well according to CBOE, implying more broad based risk rather than sector specific.

Looking at intraday price action:

Rather quiet week again for straddles. Short delta hedged straddles slightly higher on the week, unhedged straddles ~ flat. We are seeing alot less sharp reversions from open post April, in contrast to last few years where sharp reversion of overnight price action into first hour of trading triggered losses for the delta hedge done at open.

Looking at the 1-DTE SPX straddle cross-section, follow through into London Close continues to persist. Straddle performance for the 2nd half of the day flatlined. Despite trending somewhat into close, have not seen any outsized moves since 2023-2024 and briefly Jan-Apr 2025.

Realized Volatility Overview

Small down week for indices, bleed into CPI just to end the week with a +1% up day closing the week relatively unchanged. All of August & September so far we are trading within the range of a single up day on August 4th…

Intraday range based measures somehow managed to make new 2 year lows. Basically low single digit vol once market open. Overall rvol measures inched slightly higher due to overnight gaps up / down.

Broad market slumped lower on higher yields & oil but large cap tech suddenly finding a ‘safety bid’. Trump blessing markets on Monday afternoon with a deal between Ukr/Rus not to strike each others energy infrastructure. Yields immediately slightly lower with indices bid back to unchanged on the day. VIXEQ continues to trade around mid 30’s with implied correlations jumping slightly to low double digits from record lows a month ago. Rotation remains the main driver of price action as inflation fears steer participants away from bonds.

VX roll down trade one of the main beneficiaries of the rotation within markets. Despite SPX drifting lower past couple of weeks, inverse VIX ETP’s still sitting near highs after a huge rally from April lows.

SPX ATM Straddle Performance

1-DTE straddles net up ~40pts over last 6 trading days. Straddles opened during any other period intraday all net red… Record low intraday realized vol with markets closing basically near the opening print for almost entire week.

Intraday Variance Ratio

From the following post:

Bias towards long straddles into Monday & likely next few days. After the extremes printed early August on the rally, price action has remained extremely tight intraday for the past month…

VX Carry & SPX Overlay

From the following post:

Short VX rolled into Oct contract last Wed at ~18.6 from ~17 on the Sep contract. Short VX trade continues so far into Sep after triggering post July FOMC. Oct/Nov contracts trading mid 19’s, decent premium to spot as we head into Midterms. Vol acting up slightly last few days as yields & energy prices weigh on equity indices. It is highly likely we see tweets coming out from the US admin about de-escalation with Iran as yields spike & energy prices trade higher. Monday Ukr/Rus energy infrastructure ceasefire tweet already sent indices 60pts higher & US 10Y below 5% so expect more of the same regarding Iran if yields continue to spike. Basically, we have the White House managing the short vol trade going into midterms…

As always, don’t hesitate to reach out if you have any questions / suggestions!

Have a great week!

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JPM CPI scenarios for tomorrow see anything outside a ‘hot’ print pushing SPX higher by 1-2%

Given the reactions JPM lays out, ATM calls trading at only 30-40bps for tomorrow with the ATM straddles just under 80 bps. Higher end of 2 year range but again, given where yields are one would expect slightly more ‘fear’ priced in…

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Another flat week for indices as realized correlations continue their slide to 20 year lows:

NFP on Friday came in hot, almost 3x the forecasted jobs added. Inflationary pressures continue to build through energy prices with BoE this morning highlighting Ukrainian strikes on Russian refineries are raising prices on refined oil products. All eyes on CPI end of week, the last data point before FOMC decision next week.

SPX long weekend straddles went out for just under 50bps despite new strikes reported on tankers near Iran. Rolling VRP spiking back to positive as the end of July / early August moves leave the lookback window.

Mixed bag across cross asset implied vols last week. Gold / Oill continue to sit above their 2Y & 5Y averages. Equity / FX / Credit implieds ~1 st.dev below 5Y & 2Y averages.

SPX 25d skew flatter, 1m call/put implieds dropping to New Years levels, demand for deep OTM puts still holding but local vols essentially sold to holiday levels as we head into September.

Looking at intraday price action:

Despite low realized intraday vol, long SPX 1-DTE straddles net up ~55pts last week. Both delta hedged / unhedged performance slightly lower even though moves were overall trendy throughout the day. Majority of the gains for the straddles came overnight with flattish US cash sessions.

Looking at the 1-DTE straddle cross-section, momentum through London Close continued. The first hour mean reversion has largely replaced the mean reversion we’ve seen past few years into London Close.

Realized Volatility Overview

S&P sitting within 1% of ATH. Overnight performance basically at highs with US cash session basically flat since the post Tariff tantrum rally.

Realized volatility measures dropping well below 10. 1-month range based intraday vol measures sitting ~5, new two year lows. Extremely muted price action as realized correlations trade at 20 year lows.

Mag7 basket briefly made a 4 month high on Thursday last week, dragging indices higher with it. Broad market saw weakness as rate hike concerns hit small cap stocks. Post NVDA / AVGO earnings single stock average component implied vol (VIXEQ) dropped down to ~30-35. With 1m implied correlations still sub 10, we saw VIX hit 2 year lows (last seen in during Dec holidays.)

Short VIX ETP’s continue to have a huge run off April lows. Interesting that the US cash session has been the driver behind short VX trade lately, a distinct change over last few years.

SPX ATM Straddle Performance

Mixed bag for intraday straddles last week. 1-DTE straddles up ~55pts driven by the large overnight move on Tuesday. US cash session straddles down ~36pts. Market seems to completely die out into last few hours of the trading session as straddles opened post London Close down every single day with calls/puts both losing money.

Intraday Variance Ratio

From the following post:

Bias still slightly towards long straddles going into start of week. I don’t think we see much movement until the CPI number on Friday unless we get another Trump TACO as he panics over energy costs into midterms.

VX Carry & SPX Overlay

From the following post:

Signal still holding short for Sep VX contract, roll to short Oct VX on Wednesday right before CPI. Almost 3pt spread for Oct contract with Nov/Dec ~4pts. Nov/Dec unlikely to start steepening until we are past midterms so likely dead money for a few more months. Overall, nothing to add as this is just a huge short vol run since April…

As always, don’t hesitate to reach out if you have any questions / suggestions!

Have a great week!

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