Yo Pit Crazies!

Every few months, someone asks me if VIX is still relevant. 

The argument goes like this: 0DTE options have taken over, market makers now have “infinite gamma,” and the volatility index should be pinned to the floor.

There’s just one problem with that theory.

VIX hasn’t seen the bottom quartile of volatility in over a year.

Zone 1, the sub-12 readings that used to be routine, might as well be on the back of a milk carton. 

If 0DTE was truly dampening volatility, we’d be swimming in single-digit VIX readings.

Let me show you why we’re not.

0DTE Is Massive, But It’s Not Doing What You Think

The scale of the 0DTE explosion is undeniable. In 2025, zero-day options averaged 2.3 million contracts daily on SPX alone, representing 59 percent of total volume. That’s up from 51 percent the year before. Retail traders now make up 50 to 60 percent of that activity.

Here’s what the “VIX is dead” crowd misses: 0DTE options are a fundamentally different product than 30-day SPX options. The gamma profile is completely different. When you sell a 0DTE option to a market maker, yes, they’re collecting gamma. But that gamma expires at 4:15 PM the same day. It doesn’t carry forward. It doesn’t suppress next-week volatility or next-month volatility.

VIX measures 30-day implied volatility. The 0DTE explosion is noise at the daily level that washes out over the monthly timeframe.

The Data Proves VIX Still Works

Look at what VIX did in 2025. When tariff fears hit in April, VIX spiked to 60.13, the highest reading outside of 2008, 2009, and 2020. The VIX predicted that week’s market chaos days before it happened. That’s not a broken indicator.

The 52-week range on VIX spans from 13.38 to 60.13. That’s a 4.5x range. If 0DTE was truly dampening volatility through dealer hedging flows, that range would be compressing. It’s expanding.

Here’s another data point: research shows a one standard deviation increase in 0DTE volume corresponds to a 10.4 percent rise in relative volatility, 1.49 times greater than traditional options. The short-term products are adding volatility, not subtracting it.

Why the Confusion Exists

The confusion comes from conflating intraday volatility with the 30-day forward-looking measure. Yes, market makers with massive gamma positions during the trading day can act as shock absorbers for small moves. But those positions evaporate at the close.

VIX is looking at something different: what option buyers and sellers collectively think the next 30 days will look like. That signal hasn’t been corrupted by 0DTE flows because those flows don’t extend 30 days.

The people claiming VIX is obsolete are usually the same traders who got blindsided by April’s volatility spike. They’d stopped watching the fear gauge because they assumed it was broken. It wasn’t.

Your Move This Week

If you’ve been ignoring VIX because the 0DTE crowd convinced you it’s dead, start paying attention again. The indicator predicted this week’s volatility just fine. It’ll predict the next spike too.

I’m still holding my VIX puts because the trade is based on the same mean-reversion principles that have worked for decades. The median VIX reading historically sits around 17.58. When it runs above 20, it tends to pull back. When it drops into the teens, it tends to stay elevated longer than people expect, especially in an environment where Congress is running $1.8 trillion deficits and fiscal uncertainty is the new normal.

0DTE options are a different product measuring a different timeframe. They haven’t broken VIX any more than day-trading stocks broke the P/E ratio. The fear gauge works. The traders who forgot how to read it are the ones getting surprised.

Stop listening to people who learned options trading on Reddit in 2021. Pay attention to what the market is actually pricing.

AG

Rant & Rave: Congress Should Not Be Allowed to Spend

Congress spends like the pandemic never ended. The FY2025 deficit hit $1.8 trillion, coming in at 5.9 percent of GDP. That’s nearly double the 50-year average. Interest on the debt crossed $1 trillion for the first time ever.

Now we’re watching the inflation connection play out in real time. Eighteen states are banning junk food from SNAP benefits this year. PepsiCo just slashed Doritos prices 15 percent because consumers finally pushed back. Funny how companies figure out how to cut prices the moment government stops subsidizing demand. Congress created this inflation. They’re still doing it. And we can’t vote them out fast enough.