SPX sets a record close after DJT win

BY ANDREW GIOVINAZZI

November 10, 2024

If some of my Option Volatility Jargon is avexing, 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:

“SPX 5950 or 5600 by the end of the week. VIX should settle around 16 by Friday. My hope of course is everyone involved follows the election laws regardless of party but hope is not a trading word I like to depend on. Expect a violent SPX move and sharp VIX decline because one way or another the election will be over.”

So I give myself an A rating. 5950 heck 6000 and VIX crumbled to 14.96 which is lower than I thought it would go given the violent ranges. Stocks and traders breathed a sigh of relief and bought stocks with both hands for all week and stepped into overdrive on Wednesday. Frank hit the nail with finance, crypto, AI all doing well. Financial did the best and that is the market making a downpayment on a slowdown in government spending. Once the bond market is not worried, stock will do even better.

The Options Insider Radio Networks Vol Views is a little extra volatility insight with Mark or myself every Friday.

The big loser this week was traditional media and polling. As a forecasting tool, pretty much useless. The big winner, Tesla Inc (Ticker: TSLA) and Elon Musk however he did make a sizable wager since The Man would not be kind to him in 2025 so i give the guy credit for putting his money where his mouth was. Starlink in NC, and grabbing rockets on the sidelines just for fun. The guy knows how to run an organization. If he can’t fix DC, who will?

The short answer, the runup in volatility was palpable as will be the relief. Short this market at your peril and yes I say that at SPX 6000. There will be a time and it is not now. Bonds did provide a Warning Sign but it did not come to pass as the early fiscal restraint is keeping the bond vigilantes sweet.

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

SPX Sigma (volatility per term) for Nov, Dec, Jan

SPX exploded is the only way to say it. Sigma vol collapsed as the long awaited sigh of relief played out as I predicted last week. Lots of good closes this week in all OP Products.

SPX realized volatility snap on Nov 01, 2024

Realized volatility for 10 days is now 17.94% with VIX at 14.945% for a total inversion of volatility in both implied and realized. With VIX and sigmas pointing way under realized volatility, traders expect lower volatility in the short term.

VIX Volatility Curves

Closing VIX curve, Nov 08 2024

Closing VIX cash and curve, Nov 01, 2024

The election premium is gone and the VIX curve is trying to get back to normal. VIX would be 14 or lower if the rally in SPX was not so parabolic. I think that will take a week for the curve to get into a more historic position relative to the VIX cash index. At the money IV is lower, but OTM puts are gaining which is typical for parabolic rallies. Skew always prices the next move.

Basic Vol 101 on our Option Pit YouTube channel

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 We were here

VIX ZONE 4 24<

VIX free falls out of 3 into 2. I expect the bottom of Zone 2 this week as the market rally starts to cool and traders look to sell option premium again. The downard Zone creep started Monday and kept moving as betting lines expanded to favor DJT. VIX is a great leading indicator.

VIX 30 day chart with 1 min candles,

We have not seen anything in Zone1 since before Aug 5th. Right now VIX is acting normally as it plumbs new recent lows. VIX lows take a while just remember that.

The Big Call

Unless some ghoul comes out of the woodwork, stocks should rally. 6100 tickle why not as the euphoria keeps going and the DJT agenda takes shape. Coming out of the gate for Congressional Term limits is something 80% of the country can get behind. VIX should see the 13 handle this week.

Weekly Profit Cycles is opening for a quarterly subscription if you want to learn to trade VIX/SPY exclusively. I am 23 wins for last 33 opens in WPC . So getting paid to own SPY puts in an up market is something anyone can learn to do.

Let’s Go!

To Your Trading Success,

-AG