Yo Pit Crazies,

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AG's alter-ego Vol Man here with my weekly analysis. As usual, I start with my last forecast.

Last Week’s Big call for Feb 27

If stocks aren't selling off, they're going higher. Right now that's the case. Congress could take some responsibility and see where our money and votes are going, but it appears they don't want to do that either. For stocks to go higher, we need some more positive sentiment and a reason to rally. With no Gulf War III, this is still a dip-buying market and I expect VIX to have a tight range. We could break 18 next week on no news.

Of course the big question got answered and the buildup led to a Gulf War but we are not calling it that. All week, every dip was bought except Friday going into the weekend where traders are respecting the weekend risk. Even then, SPY did not close at the lows of the week but VIX sure closed at the highs.

The Weekly Wrapup

I have to admit I was surprised by the Israeli/USA attack. What I should not have been surprised about was the steady climb in VIX since Christmas Eve. VIX is the sum total of sentiment and no matter what stocks did, VIX went up. The volatility market knew something was up but I let SPY action fool me. Trump has avoided war to this point, mostly diffused them, and we are now in a prolonged conflict. Maybe. I stress anything can happen and oil prices and stocks will whip in a jiffy on any positive or negative news.

According to Frank, this is a bigger thing than just the MidEast, part of a wider plan to push back on Chinese moves around the world. Also, the success of this plan is dependent on how fast Iran’s missile launching capability lasts. It needs to go to zero for this campaign to be effective. As of now it is down 80% but needs to get to 0.

Everything else will not matter market wise. The Fed might do something to calm things but to be honest the best thing is to let things play out. Oil prices are mooning as they should and it is a reminder of how fast things can come undone if this battle plan does not work as intended.

Mini Rant

It is funny that the Epstein files started hitting the press hard last week, Prince Andrew gets arrested, Clinton testifies and then we launch an attack on Iran. Heck we did the same thing in Iraq in the 90s during the Lewinsky Saga. Go rent Wag the Dog. Congress is even more useless as there is no voter ID vote yet, no actual fraud savings, useless perp walks by Gov Tim Walz and his ilk and basically no action. The only positive news is that Rep Gonzalez of Texas lost his re-election primary campaign. Finally some consequences for a bad actor in Congress. I would like to see more of it.

(Every Friday, The Options Insider Radio Network’s Vol Views offers bonus volatility insights with either Mark or myself, no charge!)

SPY daily price action over the last 30 days with one-day candles. SPY Sigma (volatility per term) for Mar, Apr, May

SPY got a much bigger range this week since the USA launched its first offensive action since, well, Venezuela. Prior to that it has been years. The SPY range is news driven but still traders are reluctant to go all in and sell stocks. SPY could not get below 670 and stay for any length of time. Heck, SPY got back to 688 or just about 1% from all time highs mid-week.

Sigma volatility mooned and for good reason closing at highs of the week.

SPX Realized Volatility snap on Feb 27, 2026

Here's what realized volatility means: It measures how much a stock actually moved over a specific time period. Think of it like checking your car's odometer after a road trip. The odometer tells you how far you actually traveled, not how far you planned to go. High realized volatility means big price swings close to close. When SPY has high realized volatility, the market is unstable and prone to sharp drops daily.

SPY realized volatility is lying to us this week closing 12.45% for the 10 day and over 15% last week. The daily ranges were very high but most days stocks rallied back by the end of the day except Friday. The close to close volatility ended up recording relatively low. Even then with oil prices going to multiyear highs, SPY only managed down 1.3%. 20 point moves for the week in SPY are more likely than not.

VIX Volatility Curves

Closing VIX curve, Feb 27, 2026

Closing VIX cash and curve, Feb 20, 2026

The VIX curve sits in a heavy backwardation with expected movement very high in the short term. The translation is every trader was worried how this weekend would unfold. VIX closed at highs of the week and the Apr contract at contract highs. A Gulf War closing the Strait of Hormuz will do that.

Here's what that means: Backwardation is like water running uphill. VIX futures naturally want to flow toward the higher cash price over time. When the curve is in backwardation, traders expect more volatility in the short term but less in the long term.

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OP VIX Zone Watch

VIX ZONE 1 9-13

VIX ZONE 2 13.01-17.99

VIX ZONE 3 18-23.99 ← We were here

VIX ZONE 4 24+ <- We closed here

VIX started the week with a trip to Zone 4, back to Zone 3, Zone 4 for Friday. Funny enough, VIX only closed in Zone 4 Friday after all the crazy news we had. I view that as traders believe, or believed most of the week, that the conflict would be brief. It is hard to keep a Zone 4 close and we had to wait for Friday and weekend risk to get it.

VIX 30-day chart with one-minute candles

VIX was correct about the Iran Conflict. It kept the bid steady and to be honest kept rising from the Jan 03 Maduro grab. Someone, somewhere had this in mind and was correct. I am constantly reminded VIX is the best signal there is and this conflict is no exception. We did close on a cash high so traders were prepared for the worst.

The Big Call

As I write this, Iran is calling for the halt of bombing their neighbors. If so, that is a big drop in hostility or a de-escalation to use a Frank word. Will it last? Who knows. That alone could get VIX back to 24 and oil prices dropping 10%. Any news like that will make stocks move 10 points SPY in a heartbeat. My call is that stocks and VIX will move on the news. If there is more USA/Israeli success, SPY will rally and VIX will drop a bit. It is likely VIX stays in Zone 4, bouncing until there is a real cessation of hostilities. What I do know is that Israel will no longer tolerate Iran funding incursions. That will be a forever policy and profound shift in the Mideast. And for now, there are two USA carrier task groups there to help. This is a big gamble to reshape the Mideast and if it works, there could be a chance for peace.

A real setback this week puts SPY into the 650s and VIX will jump to the 30s. Everything is so touchy that any bad news will send markets into a tail spin. My guess is that this week's range for SPY will be bigger than last week's.

To Your Trading Success,

Andrew