The VIX® Index Falls to 4-Month Low as Equities Set Record High

Link to Report: Macro Volatility Digest

WHAT STANDS OUT:

• Cross-asset volatilities declined across the board on the back of President-elect Trump’s nomination of Scott Bessent to Treasury secretary. The largest mover was rate volatility which declined from 70th %ile highs to 35th %ile levels following sharp declines in US government bond yields.
• The VIX® Index fell to 13.5 last Friday- its lowest level since the Aug 5 Yen-carry unwind as the S&P-500 Index set yet another record high. It’s 1.7pt decline was roughly double the move expected by the pre-established skew in response to the S&P-500® Index’s 1% wk/wk advance. In the 4 weeks since the Elections, demand for Dec year end expiry OTM puts and calls have increased by 40% and 20% respectively. The 15MM in newly opened delta adjusted Dec SPX puts contracts is concentrated in the 5800-6000 strike range.
• Year-end VIX convexity has been a trending sale; consequently, vol-of-vol has normalized with the VVIX Index falling 9 pts to 86 (47th %ile) w/w. VIX put skew has steepened significantly as an aggregate 3MM contracts in delta-adjusted VIX calls centered on the 20-strike have been sold to fund a similar number of 13 to 15-strike VIX puts.

Chart: Increased Demand for VIX Puts into Year End

^{Source: Cboe}

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