Market Overview - March 23rd 2025
S&P Index Options & Volatility
Following up on last weeks overview:
Following FOMC, we see easing in implied vols across assets. Equity markets nearly 5% off last weeks lows and short dated vol (up to 0-dte) is almost back to last 12 months average. News about countries receiving breaks on tariffs further ignites short covering & vol repricing lower.
1-DTE SPX Straddles went into Monday ~80bps, tmrws straddles now down to ~60 bps almost back to mid range for last year.
Post monthly OpEx historically leaning positive, albeit majority of the positive weekly call performance was in 2021/2022.
Cross-asset vols roundtripped lower, equity implied vol still relatively ‘richest’ on a 2Y lookback basis. With the approaching tariff deadline it is unlikely vols drop too much further at least until we see what happens in early April.
Skew flattened as equities bounced, call skew much flatter, put skew sticky.
Looking at intraday data:
Short SPX 1-DTE delta hedged straddles ~ flat over last week as ranges continued to be wide but markets largely flat on a cl-cl basis.
Looking at the straddle cross-section, eod momentum faded last week as likely deleveraging flows are done, in fact we see US RTH session buying almost every day last week (more on this in the SPX ATM Straddle Section.)
Realized Volatility Overview
Mostly US RTH session buying last week, overnight performance ~ flat since Nov now. Many expected a bounce post OpEx and now we get to see how far we go… (likely close above 200MA today.)
Looking at VRP, many also noted that we are now traded in a negative trailing 1M VRP for equities. While true, we are starting to see the 10d rvols drop to near 15 & Mondays intraday range suggests we will see faster rvol measures drop further today. I’ve also mentioned many times the persistent mean reversion in intraday rvol where days with low intraday trend are immediately follow by strong trend days (see the intraday variance ratio section.)
Still see realized correlations high on this bounce, however 1M implied correlations starting to move back to early March levels. Once we see correlations lower likely back to low vol grind higher (for now still gonna see larger moves.)
Relatively muted moves from VIX Futures, but given how smooth the move lower was and no parabolic move in rvol, kinda expected that we didn’t see large capitulation move like in August.
SPX ATM Straddle Performance
Lots of US RTH session buying, RTH straddles almost all green for last 6 days. Straddles opened at 10am down 128pts total for the week. We had rich implieds early in the week with markets largely closing flattish… 1-DTE ATM straddles down ~33pts on the week, call side net up ~54pts, put side net down ~86pts.
Intraday Variance Ratio
From the following post:
Large intraday variance relative to cl-cl throughout last week, bias flipped to long straddles on thursday close for a trend intraday (today trend caught, friday loss, will likely flip to cash next few days if we continue trending.)
1-DTE longs outperforming a bit as RTH session sees us bid the overnight dips back up albeit not enough to offset straddle premium paid.
VX Carry & SPX Overlay
From the following post:
VX curve inversion with spot VIX ended Friday, signals still cash as of Monday close albeit now closer to a short (if VX Apr rvol stays low.) Outperformance vs systematic short 30 day VX (SVXY proxy) mostly comes during periods like last month and is a welcome change given last year.
As always don’t hesitate to reach out!
Have a great week!