Market Overview - August 11th 2025
S&P Index Options & Volatility
Following up on last weeks overview:
Market once again doing its best Wile E. Coyote impression, recouping all of the post FOMC losses and rallying back to highs (NDX making new highs on Friday.) Short dated volatility scraping decade lows again as we head into CPI. Any risk from econ data releases seems to be concentrated immediately following the data release with zero follow through in the coming days as everyone just goes back to buying the ‘AI’ theme winners.
Weekend SPX straddles once again fell to sub 50bps after briefly trading higher for NFP.
Last weeks pop in implieds barely noticeable and we have once again equity vol down to -1 stdev on 2Y lookback.
Despite the barely short of ‘euphoric’ price action, 1m skew remains steep and still trading in the post Aug 2024 range.
Looking at intraday price action:
Short SPX 1-DTE straddles flat for delta hedged & down for unhedged last week. Don’t see any follow through on negative reaction to data releases. Seasonality wise, we are going into a more turbulent period for the next few months before Nov/Dec trough in vol.
Looking at the cross section, nothing major, slight bump last week in overnight performance due to major gap up on Monday but nothing relative to the drop in vol we’ve seen since April/May when looking at overall performance.
Realized Volatility Overview
Overnight performance once again taking the lead here, market alot more choppy during US trading hours.
Slight bump in realized vol, short dated VRP back to negative as markets brush off any concerns…
Post earnings, single stock vol back down to May/June lows. Relative tech outperformance is apparent, however, implied corrs seeing a bid higher throughout last week despite realized corrs dropping to lowest level in 5 years.
Many pointed out that this was first earnings season in history where average large cap move was larger than implied…
Despite many signs pointing to stretched markets & extremely myopic view of risk events, JPM thinks we can still continue to rally for 3 key reasons:
Expectations already lowered
Corporate earnings continue to grow (lets assume no accounting gimmicks)
Trump is TACO
VX30 same pattern as SPX lately, grind lower overnight with chop/bid intraday.
SPX ATM Straddle Performance
Long 1-DTE straddles up ~86pts last 6 trading days with SPX largely flat. All moves between Globex & first half of the day last week. Straddles opened after london close net down 65-90pts.
Intraday Variance Ratio
From the following post:
Intraday price action saw strong trend last week. Bias now for churn going into Monday, but would not be surprised to see some extremes soon especially after CPI. While CPI day straddles have lagged FOMC in terms of payouts (especially once we moved away from the 2022 scare) I think we will see some tariff feedback one of these months especially given how much cheaper CPI day straddles are than FOMC now.
VX Carry & SPX Overlay
From the following post:
Triggered back in short Wed open, but more prudent to go with VX Sep short rather than Aug contract… ended up costing a bit as Aug collapsed but I have no faith in this holding through end of August without markets getting a shakeout. As I said before with steep SPX skew & high single stock implieds, when we do have a spike expect us to hit 30’s rather quickly, this is not 2017 with average single stock vol in mid teens…
As always don’t hesitate to reach out!
Have a great week!