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Expectations for significant market volatility in October are increasing, according to Brian Stutland, Founder of Equity Armor Investments. Despite declining levels of realized volatility, the Hedging Stress Index remains high due to rising geopolitical tensions. Unlike FOMC or CPI events, war risk is harder to hedge with 0dte options, leading to a spike in longer-dated skew. The VIX is likely on the verge of a significant rise, driven by speculative vol-shorting behavior and imbalances from prolonged flattening and inverted yield curves. However, a slight drop in fixed strike volatility was observed after the jobs report, though overall skew remains elevated. All else being equal, 1M skew is expected to decline next week, but if it holds, we could face a rocky few weeks heading into the October OpEx.
Slight drop in fixed strike vol after the jobs report, but overall, skew remains elevated. All else being equal, we expect 1M skew to decline next week as complacency makes a comeback. However, if skew holds, we could be in for a rocky few weeks heading into the October OpEx. https://t.co/LFvG2LF286
VVIX/VIX bottomed yesterday which means they're about to crush volatility $VIX. They've intentionally made it so markets will by rallying hard over the next 30 days into the election. VVIX/VIX should head back up to the purple 2018 trendline. https://t.co/gwkRb7bDoz https://t.co/BhnvUWdF0b
Bloomberg: The VIX is likely on the threshold of one its thematic 1-2 year net rises. A long period of flattening and inverted yield curves has fostered a surfeit of speculative, vol-shorting behavior. The imbalances this engenders eventually unwind, culminating in an extended… https://t.co/AAtF0eG6pM
