BY ANDREW GIOVINAZZI
April 26th, 2025
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
Last Week ending Apr 25:
I am starting to see parallels with the Euro Crisis and Debt Downgrade time frame from 2011. It’s quite simple: both the House and Senate know there is a spending problem, but nobody is doing what is necessary to fix it. Government problems are big now due to the nature of the markets for their securities growing so big. Until the bond market forces Congress to take the issue seriously, I expect more back and forth volatility. Tariffs may provide a short-term boost to government revenue, but without real spending reform—something resembling the fiscal discipline of the 1990s—the White House will likely resort to more drastic measures to get Congress to act.
Earnings should be ok, but the outlooks will all be horrible. Early earnings report from chip behemoth Taiwan Semiconductor (Ticker: TSM) was great, but export controls threatened the good news. Without any meaningful news on U.S. government spending reform, equities are likely to remain under pressure. I expect SPY to gradually drift back toward the $510 level in the short term, with only brief rallies to current levels. The VIX will probably remain elevated in the high 20s for at least another week.
Weekly Wrap-Up
I am giving myself an A- on the S&P 500 Trust ETF (Ticker: SPY) moving from $510 to to finish above the previous week’s highs. It would’ve been a solid A if I had predicted the wild twist of Trump firing and rehiring Powell in the same day. The VIX held in the 20s for most of the week before finally dipping into the lower end of Zone 4 on Friday.
Earnings were solid but the outlooks were opaque to say the least. Alphabet Inc (Ticker: GOOGL) produced huge numbers and the stock was up $5. The Mag 7 is still sputtering but the Market Vectors Semiconductor Index Trust (Ticker: SMH) is back above $200. That index peaked at $280 this summer on AI madness and traded as low as $175 a few days ago. That is better than a 30% off sale still.
Interest rates slipped a bit and no new tariff news as the White House is negotiating with everyone but the Chinese it seems. Congress continues to whistle past the graveyard on spending as Elon Musk looks to get back to running his companies. Will the D.O.G.E. impact be felt? The verdict is still out, but Elon made an effort to pressure the government on spending—time will tell if it has any lasting effect. Once the flow of bad news eased on Monday, stocks staged a strong rally.
If this kind of volatility is creating headaches, here is a solution.
The Options Insider Radio Networks Vol Views is a little extra volatility insight with Mark or myself every Friday. It’s free!
SPY daily price action over the last 30 days with 1 day candles
SPY Sigma (volatility per term) for May, Jun, Jul
SPY started the week dipping below $510, only to rally 40 points and close above $550.This kind of market action signals that Fed Chair Powell is likely staying on because we need at least one person who can say no. That was good for a huge rally, and for now, stocks appear to have settled into a new range.
SIGMA volatility closed at its lowest point of the week, which is significant since traders aren’t bidding up the volatility for next week. Volatility has effectively reset to April 4th levels. While tariffs are in play, there’s little clarity beyond that.
SPX realized volatility snap on Apr 25, 2024
10-day realized volatility (HV10) has dropped sharply to 27.23%, down 35 points from last week—a major compression. Traders now have an 80-day window to watch how the tariff situation unfolds. With the VIX closing at 24.85, 30-day implied volatility is already pricing in the current drop in realized volatility.
If all this volatility gets you nutty, try a strategy which does not care where the market goes.
VIX Volatility Curves
Closing VIX curve, Apr 17, 2024
Closing VIX cash and curve, Apr 25, 2025
The VIX curve remains in full-blown extreme backwardation. That means VIX futures are set to grind higher daily toward the VIX cash level. The catch? VIX is sitting just above 24—right at the lower edge of Zone 4—so while we’re still in a volatile environment, it’s roughly 30% calmer than last week’s peak.
You can check out Volatility 101 basics on our Option Pit YouTube channel – now streaming.
OP VIX Zone Watch
VIX ZONE 1 9-13
VIX ZONE 2 13.01 TO 17.99
VIX ZONE 3 18-23.99
VIX ZONE 4 24 ← We are here
VIX remains in Zone 4 and is showing signs of trying to break out. After spiking at the start of the week, it steadily trended lower but hasn’t been able to fully exit the zone just yet.
VIX 30 day chart with 1 min candles
VIX peaks this week are nothing like what we saw two weeks ago. VIX struggled to stay elevated throughout the week, and VVIX, the vol of vol, closed at a 3 week low.
The Big Call
Last week, I noticed some similarities to the Euro Crisis of 2011. While the U.S. still faces a debt issue, traders seem to be moving past it this week. My sense is that they’re gaining confidence in the White House’s plan. Tariffs will help boost revenue, but we still need a solid spending plan. Earnings remain strong, there are 7 million unfilled jobs, and much of the negative surprise news seems to have been priced in. These are generally bullish signals.
Stocks could reach the 570s for SPY, and the VIX should dip down toward 20.
To Your Success,
AG aka “Vol Man”
Andrew Giovinazzi
30-Year Trading Pro
See what's hot at option pit
CAPITOL GAINS: SMR Aug16 7 call closed for a 150% gain
DELTA STRIKE: VLY Mar15 8 puts closed for a 88% gain
PFE May17 26 calls closed for a 66% win
OP MENTORING: SPY Mar22/19 510 put calendars and 520 calls for 6.4% gain
OPTION SHOPPER: ERX Mar28 65 calls closed for a 90% gain