What the tariffs mean for volatility and you

BY ANDREW GIOVINAZZI

February 16, 2024

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…Keep ready for my surprise for next week!

Last Week ending Feb14:

The Big Call

The call is the same as last week. Nvidia Inc (Ticker: NVDA) earnings are not for a while but the massive Capex in Big Tech should hold the NVDA value for a while. Most of the news is market stabilizing which is why SPX keeps looking for 6100. With most of the big news out it is just tariffs related to bad news. Breakthroughs with D.O.G.E. could boost bond prices and stocks. I see 5900 again as a low and all time highs if the current tariff rumors have no legs. Slow news weeks are slow vol week.

Weekly Wrap up

I am giving myself a B+. Close above 6100 SPX with VIX falling to a weekend adjusted 14.73. The low of the week was just 6000 so the ranges tightened up a bit. Nothing close to the action we saw the previous weeks.

Big Tech is still clawing back and Nvidia Inc (Ticker: NVDA) is back to $137 after the trip down to $115 the previous week. Big Tech committed to massive spend in their earnings calls. This hurt Alphabet Inc (Ticker: GOOGL) and Microsoft Corp (Ticker: MSFT) but should deliver down the road. The Invesco QQQ Trust (Ticker: QQQ) finished strong this week.

D.O.G.E. and the bond market is still the Big Story. The lower range this week mostly came from a softer tariff approach and a raft of Federal judges trying to tell the government how to spend money. To the extent the Executive Branch prevails in court, that will tell us how effective D.O.G.E can be. That is the news to watch in my view over the next several months. The amount of wasteful spending and fraud will get posted soon enough. The iShares Barclay 20+ Year US Government Bond ETF (Ticker: TLT) held up well this week. That is the handy D.O.G.E. indicator. I am long some call butterflies in TLT.

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SPX daily price action over the last 30 days with 1 day candles

SPX Sigma (volatility per term) for Feb, Mar, Apr

SPX got to whisker of all time highs and held. The market likes what it is seeing as does the bond market. Note SPX continues to orbit, up and down, but cannot find the breakout momentum. I don’t see that changing unless some news improves. CPI/PPI numbers could not break the market in the short term. Early news caused a rift but was quickly bought back.

Short term IV crashed to month lows. A big part of that was the 3 day weekend and holiday. Notably the March Sigmas got back to 1 month lows, with April holding on a bit. Still lower SIGMA is lower sigma so that is positive for SPX bulls.

SPX realized volatility snap on Feb 14, 2024

Realized volatility for 10 days (HV10) is now 10.23%. The 60 day realized (HV60) is 12.59

These realized vol numbers belies the intraday average true range (ATR) which is 1.5x at least the realized volatility. This is the same as last week with well over 1% to 1.5% move intraday for several days. The ranges are getting smaller.

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VIX Volatility Curves

Closing VIX curve, Feb 07, 2024

Closing VIX cash and curve, Feb 14, 2025

The VIX curve stayed in contango and all the VIX futures are fractionally lower. This is because the market does not want to go down but intraday volatility remains high. We did get some real drops in VIX and the curve is very steep going back for VIX near 15. The market is not ready to drop the longer term IVs quite yet. Traders need a quiet week and maybe the Winter Break will provide it.

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OP VIX Zone Watch

VIX ZONE 1 9-13

VIX ZONE 2 13.01 TO 17.99 We are here

VIX ZONE 3 18-23.99

VIX ZONE 4 24<

VIX is in Zone 2 and never left for the first time in 2 weeks. All of the indicators are pointing to a lower VIX this week.

VIX 30 day chart with 1 min candles,

VIX finally made a pre-Deepseek low. Tariff talk, D.O.G.E and the rest of the bearish market news finally made its way out of the VIX cycle just in time for expiration.

The Big Call

We have a 4 day holiday week. I expect VIX to trade to the low 14s and SPX to be severely range bound. New highs might happen if some of the big energy names can produce good earnings or more positive news on the US Gov spending front. I think we can glide up to 6200 SPX on the recent positive momentum at least once.