BY ANDREW GIOVINAZZI
September 14th, 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 12th:
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.
Weekly Wrap up
I’d grade myself a D since I forgot to mention the PPI/CPI numbers, SPY made an all time high and VIX tickled the year lows. The only thing remotely right was a quiet week with a 1% gain.
Oracle Corp (Ticker: ORCL) produced a forward booking schedule in the 100s of billions of dollars range and just snapped traders into go go mode. The biggest difference I see with this relative to the .Com Boom is that AI is producing massive dollars for chips, connections and data servers and the IP that connects it.
CPI and PPI numbers were hot and cold so net no real temperature changes. That pushed the Fed Funds chance of lower to 100% and likely we see a string of .25% cuts over the next year.
I will add to the calendar that the end of the month spending resolutions could add a fly in the ointment since the Dems want a win and they might hold the line. That of course would be the first time a party did so I see that as unlikely. Any real reform would be very bullish stocks but Congress is lazy and stupid and the bond vigilantes are the only thing that will get them to change. AI could cut the deficit by 80% in 1 minute since most of the spending is a hangover from the Covid Era.
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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 ORCL’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. A lot of the rally this week came from stocks other than the Mag 7 which in my view is bullish.
SIGMA volatility showed dead flat to down as the inflation picture got better. Sep Sigma is dead low considering FOMC Wednesday so it is crazy cheap.
SPX realized volatility snap on Sep 12, 2025
The 10-day realized volatility (HV10) remains low at 8.70%, signaling a continued bull market environment. The only big move this week was up in SPY with the last 2 months looking like no period in 2025 for realized volatility.
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, Sep 12 2025
The VIX curve remains in about 85 percentile contango, similar to last week. All VIX futures gave up $1.00 or so this past week. The market is set on a rate cut from the big drop in VIX futures. For the first time all year, we are setting up for low VIX numbers into Zone 1.
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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
VIX ZONE 4 24
The VIX dropped steadily all week as the inflation data came out. This is the lowest VIX number into a FOMC meeting in a year. If the market gets a cut, Zone 1 it is. Also, risk premium over realized volatility is running at 80%. So option prices in the broad indexes are still relatively high.
VIX 30 day chart with 1 min candles
The only surprise VIX spike this week was the news about Charlie Kirk getting shot. That hit the wire and stocks fluttered. ORCL earnings really put the spike in VIX for the week.
The Big Call
I expect the Fed to drop by .25% on rates, stock will like it a bit and put in an all time high and then we sit around and wait for the knuckleheads in Congress to do their job and fund the government in a reasonable manner. VIX should tickle 13 for a Zone 1 touch.
To Your Trading Success,
AG