BY ANDREW GIOVINAZZI
August 4th, 2025
Yo Pit Crazies,
I was away for the latter part of last week due to a family matter, but I couldn’t help noticing a curious divergence in the markets: while price action was moving one way, the VIX and broader volatility metrics were telling a different story. Because of this disconnect, I took a more cautious stance as we approached the August 1st “Liberation Day #2.”
It’s rare that we get Advanced Notice warning of market-moving events, but President Trump continues to be a source of surprises.
By “battening down the hatches,” I mean that I held onto my SPDR S&P 500 Trust (Ticker: SPY) puts through Friday. So why did I hold them?
VIX curve, Jul 31, 2025
The truth is: I had a heads-up due to Mark’s new AI tool.
SPY rallied, with VIX all week
VIX in contango may seem unusual, but it’s actually quite common—occurring over 70% of the time. It simply reflects that traders are willing to pay more for volatility further out in time. (See chart above)
When I first got started, the landscape was different. Back then, long-term implied volatility often traded at a discount to short-term IV. A handful of firms made serious money buying that long-term vol—especially around the 1987 crash and into the mid-90s—before the rest of the market caught on.
That wasn’t exactly “advanced notice,” but rather a deeper understanding of how volatility worked. And it highlights a key lesson: the better your understanding, the better your opportunities.
Watching both VIX and SPY rally throughout last week was unusual—but it’s becoming a more common pattern in 2025 compared to previous years. Much of it seems to revolve around headline-driven events, often with the President at the center. The market reacts, the event passes, and things eventually settle.
I closed all my SPY downside exposure on Friday—first, because it hit my target, and second, because we remained in contango the entire time. We got the move, but there was no real panic.
That’s the mindset I’m bringing into this week: the move happened—now it’s time to let the panic fade.
To Your Trading Success,
AG
