BY ANDREW GIOVINAZZI
September 7th, 2025
Yo Pit Crazies,
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
The Week ending Sep 5th:
I expect SPY won’t reach new highs next week and will likely trend lower. As we await the Fed’s rate decision, some downside pressure is expected. The VIX should remain in Zone 2, while SPY may test around 630 during the shortened week. It should be relatively quiet, but Friday’s VIX rally suggests volatility might pick up.
Weekly Wrap up
I’d grade myself a B- since we traded down to the low 630s, and the VIX briefly spiked into Zone 3 for about an hour. We did see some action, with stocks rallying to all-time highs for a short time.
Broadcom Inc. (Ticker: AVGO) delivered strong earnings, boosting stocks on Friday. However, the reality of a shrinking jobs market eventually weighed on traders, prompting selling.
Both ADP and NFP reports were weak enough to spark optimism about a rate cut. After a year of “good news is good news,” traders reverted to the old QE mindset: bad news is good because it signals rate cuts. God help us.
Meanwhile, the challenge of the U.S. government needing to spend less remains daunting—one Congress seems unwilling to face. A Court of Appeals ruling against tariff benefits added to traders’ gloom at the start of the week. Ultimately, the market is waiting for the Fed to ease.
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SPY daily price action over the last 30 days with 1 day candles
SPY Sigma (volatility per term) for Sep, Oct, Nov
Another surge to all-time highs driven by AVGO’s strong earnings and the potential for a rate cut. While significant growth in one sector is possible, for SPY to post substantial gains, that momentum will eventually need to spread across the broader economy.
SIGMA volatility attempted a rebound this week but couldn’t sustain it. It gained some traction as the market repriced expectations ahead of the FOMC, but that was about it—a fairly muted response following Friday’s close.
SPX realized volatility snap on Sep 05, 2025
The 10-day realized volatility (HV10) remains low at 11.39%, signaling a continued bull market environment. Aside from a 1.5% intraday move on Tuesday, the week was relatively calm. In periods of low realized volatility, stocks typically avoid sharp sell-offs.
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, Sep 05, 2025
Closing VIX cash and curve, Aug 29, 2025
The VIX curve remains in about 90% contango, similar to last week. Near-term VIX futures have declined roughly 0.25 since last week. If any significant activity is happening, it’s not reflected in the VIX curve.
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OP VIX Zone Watch
VIX ZONE 1 9-13
VIX ZONE 2 13.01-17.99 ← We are here
VIX ZONE 3 18-23.99 ← We traded here
VIX ZONE 4 24
The VIX spiked to 19 on Friday, but the negative sentiment faded quickly, not lasting through the day or even the afternoon. Market concerns over tariffs vanished by Wednesday. For now, we’re back in a downtrend zone, awaiting the Fed’s next move.
VIX 30 day chart with 1 min candles
The VIX spike last Friday was concerning, and it surged again on Tuesday. This Friday started similarly, but by the end of the day—with the weekend approaching—volatility was sharply crushed, finishing near the day’s lows.
The Big Call
I don’t expect SPY to reach new highs next week and anticipate a downward trend. With no major catalysts until the 17th, it looks like a repeat of last week—lows in the 630s and only a modest rise in the VIX. It should be a quiet week, but you never know with The Donald.
To Your Trading Success,
AG