BY ANDREW GIOVINAZZI
May 3rd, 2025
If some of my Option Volatility Jargon is vexing, our Glossary is here.
AG’s alter-ego Vol Man here with my weekly analysis. As usual, I will start with my last forecast…
Last Week’s Big call
Last Week ending May 02:
Last week, I noticed some similarities to the Euro Crisis of 2011. While the U.S. still faces a debt issue, traders seem to be moving past it this week. My sense is that they’re gaining confidence in the White House’s plan. Tariffs will help boost revenue, but we still need a solid spending plan. On the positive side, corporate earnings remain strong, there are approximately 7 million job openings, and much of the recent negative news appears to be already priced in—factors that typically suggest a bullish outlook.
Given this backdrop, SPY could potentially climb into the 570 range, while the VIX may trend down toward 20.
Weekly Wrap up
I am giving myself a B- on the S&P 500 Trust ETF (Ticker: SPY) moving to the mid-560s and VIX meandering toward 20 with a Friday close of 22.68. I put out bullish signals and rode them up in my products, but didn’t quite hit my marks.
The theme of the week is AI is back and China/USA might have a trade detente – both broadly positive developments. Meta Inc (Ticker: META) was up $80 this week and Microsoft Inc (Ticker: MSFT) declared their AI spend good in its battle with arch rival Alphabet Inc (Ticker: GOOGL) search and software. Jobs were very strong as the NFP number came in nice and rosy. Companies are claiming no guidance for earnings but they are hiring anyway. That means they think things might work out but won’t admit it yet.
Interest rates held firm for the most part as Congress argued over how much money they were going to spend. They still think a number under the COVID extravagance is good governance success. If the defense budget is any indication, Congress appears set to fall short in exercising fiscal restraint—continuing to allocate excessive funds to states, despite lacking the financial capacity to do so.
So far the bond market is unphased.
If this kind of volatility is creating headaches, here is a solution.Every Friday, The Options Insider Radio Network’s Vol Views offers bonus volatility insights with either Mark or myself—free of charge!
SPY daily price action over the last 30 days with 1 day candles
SPY Sigma (volatility per term) for May, Jun, Jul
SPY opened the week below $540 but rallied sharply, gaining 25 points to close above $565. The primary driver was strong economic data, combined with the absence of any new negative tariff developments. April’s earlier volatility eased notably this week. That said, SPY remains capable of sudden 10-point drops, and until that pattern breaks, the VIX is likely to remain anchored around 20. We’ll need at least a week of stability to see it move meaningfully lower.
SIGMA volatility closed at its lowest level of the week, with July contracts just about one point above the elevated levels seen around the volatility spike on Liberation Day.
SPX realized volatility snap on May 02, 2024
10-day realized volatility (HV10) has dropped sharply to 21.74%, marking the 3rd consecutive week of dropping volatility. It’s hard for VIX to take off again if realized volatility keeps decreasing. Meanwhile, the 60-day realized volatility remains elevated at 33%, but the market is now discounting that severely.
If all this volatility has you feeling nutty, consider a strategy that’s directionally neutral and doesn’t rely on which way the market moves.
VIX Volatility Curves
Closing VIX curve, May 02, 2024
Closing VIX cash and curve, Apr 25, 2025
The VIX curve changed shape for the 1st time in a month. We are now very flat, which signals strong, unstable moves in VIX either up or down. This is a big deal for volatility and usually a sign that the event is over.
You can check out Volatility 101 basics on our Option Pit YouTube channel – now streaming.
OP VIX Zone Watch
VIX ZONE 1 9-13
VIX ZONE 2 13.01 TO 17.99
VIX ZONE 3 18-23.99 We are here
VIX ZONE 4 24 ← We were here
VIX dropped into Zone 3 from 4 and stayed until the close Friday. Most of the big tech earnings are out and the FOMC is next week. That meeting alone is not enough to push VIX back to Zone 4.
VIX 30 day chart with 1 min candles
VIX peaked midweek and trended lower through the rest of the week, returning to levels seen before Liberation Day. The market has shifted back to pricing in the possibility of trouble, rather than reacting to immediate turmoil.
The Big Call
The U.S. continues to grapple with its debt challenges, and the FOMC is likely to weigh in soon. So far, the Fed has remained silent on the matter, which I consider a form of financial malpractice. Overall, the news is generally positive, if there’s any to be had. Earnings are solid, but guidance remains absent, and the U.S. has secured a mineral deal with Ukraine. What could possibly go wrong?
This could be the first week of subdued volatility, with SPY hovering just above 570 and the VIX staying at 21 or lower following the FOMC meeting.
To Your Success,
AG aka “Vol Man”
Andrew Giovinazzi
30-Year Trading Pro
See what's hot at option pit
CAPITOL GAINS: SMR Aug16 7 call closed for a 150% gain
DELTA STRIKE: VLY Mar15 8 puts closed for a 88% gain
PFE May17 26 calls closed for a 66% win
OP MENTORING: SPY Mar22/19 510 put calendars and 520 calls for 6.4% gain
OPTION SHOPPER: ERX Mar28 65 calls closed for a 90% gain