Yo Pit Crazies,

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

If my Option Volatility Jargon is vexing, tap our Glossary here.

Last Week’s Big call for Mar 20

Remember when Hamas invaded Israel in Oct 2024? Oil prices spiked and everyone thought the worst. Now Hamas is toast, Hezbollah is on the run, and Iran is clinging to what is left of their missile launchers to bring down their enemies. My guess is they will eventually run out of them. I don’t think it will happen this week so my prediction is SPY will likely continue lower toward 650 while VIX coils tighter, building pressure until the market finally gets its catalyst.

The Weekly Wrap Up

Well I was spot on with my prognostication.

I held VIX call spreads until Friday’s close but the performance was only so so. They made a little money but considering what is going on in the world the market could not kick the volatility into high gear.

This is also my reminder of how hard it is to get VIX over 30 and stay there. This is week 3 of mostly backwardation out of VIX so traders are still somewhat shell shocked. They have what I call Volatility Fatigue.

More on that later.

The story is in the chart below. This is the US Oil Trust (USO) and it is trading near 3 year highs. Remember when Russian oil was embargoed in 2022 on the Ukraine Invasion? That looks like a blip. The market found oil and we likely will do it again but it might take more time. This is still the story and having an Omani Nat Facility lit up put stocks into freefall Thursday and Friday.

USO Chart for the last 5 years

We toss the Iran Conflict on top of AI dislocation, credit “risks”, inflation and the neverending US Federal Deficit that no one but two Congressmen are worried about. For all of that SPY is off 45 points or 6% from all time highs. It should be 10% or more. Traders are looking for the Trump reversal after seeing it so many times before. Will they get it?

Mini Rant

The MSM talks about the mission but no one knows what it really is, at least outside of the White House. Iran’s offensive capabilities are mostly gone but as long as their oil flows, they will rebuild it and there is still some fight in the dog. Is this payback for Hamas invading Israel years ago? Maybe. The mission might be just a massively degraded Iran and if they make mischief again, they will lose the top leadership again. There are a lot of questions and not many answers which might be the idea. Remember the tariff tantrum got 15% tariffs across the board for the USA. The ultimate objective is still a mystery in the Iran Conflict.

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

SPY closed at a month low and without any direction now the thought is to just sell stocks. I don’t see that changing until more questions are answered. Most stocks turned in great earnings in January. Job growth is muted but not bad considering the AI doom scenarios.

Sigma volatility ended the week at 30-day highs. It should now be seen that SPY has moved 7% from the year highs.

SPX Realized Volatility snap on Mar 20 , 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. When SPY has high realized volatility, the market is unstable and prone to sharp drops.

SPY realized volatility is still under 15 on the 10 day and VIX is 27. That is still crazy low considering how high VIX is. This is where the volatility fatigue comes in.

Traders are pressing option prices very high even when the market is not moving very much. That makes it very hard to make money trading options in the midterm. SPY was down 1.5% Friday but really that was the first big day in weeks. VIX is looking for that move close to close every day.

VIX Volatility Curves

Closing VIX cash and curve, Mar 07 and Mar 13

Closing Curve Mar 20

The VIX curve is in full backwardation. All the short term VIX futures are higher than the long term VIX futures. That means traders expect VIX to jump in the short term or at least keep the move going higher.

It also looks a lot like last Friday and the reason being the VIX curve is the market sentiment. Not much has changed since last Friday and the situation, to say the least, is very fluid. The curve will stay like this until something material changes.

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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 touched here

VIX ZONE 4 24+ ← We lived here

VIX started the week in Zone 4 at 27 only to give it back as oil bounced around and stocks rallied on any hope of the conflict ending. By the close Friday, most of that was dashed as escalation from Israel put everyone into a tail spin.

Considering how low relative realized vol in SPY is, VIX is well priced to absorb the market moving.

VIX 30-day chart with one-minute candles

VIX was not able to make a new high this week although finished nearer the top of the range.

The Big Call

The big question here is the Trump Adm keeping folks guessing. What is the mission and what will it accomplish? Right now it looks like payback for 50 years of sponsoring terrorism in the Middle East for Iran. My guess is a seizure of oil assets would mean Iran has lost power to inflict damage any more since they will shortly run out of money.

That still means VIX will keep winding up slowly in fits and starts and SPY likely makes a new low until this happens.

Trump is signalling via Twitter the USA mission is winding down but that could leave Israel free reign to inflict damage since the USA and Israel are using slower moving attack aircraft now that they control the Iran airspace.

The more questions I have here, VIX is likely higher and SPY lower.

To Your Trading Success,

Andrew