BY ANDREW GIOVINAZZI
July 3rd, 2025
Hey there, Andrew here.
Yesterday I called what we’re seeing “more or less historic.”
Today’s jobs euphoria just proved me right.
I’m trying to remember the last time I’ve seen this, and I feel like 1999 was the last time I’ve seen volatility this high with the market this high.
We’re talking SPX at all-time highs with VIX refusing to drop where it should mathematically.
Yesterday VIX was at 16.70. Today after that monster jobs rally? 16.38.
That’s the most bizarre activity I’ve seen so far.
Here’s Why This Setup Has Me So Fired Up
Let me walk you through the math that’s got me excited, because this is where it gets interesting.
VIX generally at this high level should be 14 and a half. All of our puts should be worth $2 more than they are currently.
So what’s happening?
I believe we have an event around July 9th. Trump’s gonna say something on the tariffs and all traders are waiting for that moment. They’re buying puts just in case and staying long. They’re long gamma.
But here’s the thing – and this is what most people don’t understand about the VIX calculation mechanics.
When you rally from 510 to 625, which is essentially what we’ve done, you should see a huge drop in volatility.
The math alone should push VIX down around two and a half points just from the price movement.
What happens is because of the way VIX is calculated, there’s a square on all your volatility samples.
As you rise, all the vega weights drop huge, just mathematically. Your average sample size gets smaller, which means VIX should be going down on a vanilla rally.
But instead, what we’re seeing is sticky volatility. The volatility is staying at the money and pulling VIX up, keeping it from dropping.
The Personal Stakes That Have Me Positioned
I’ll be honest – I’m down like almost a hundred dollars, over a hundred dollars per contract on my put spreads. And a lot more on my SPY put spreads.
But here’s what’s keeping me excited: My VIX puts? They’re down marginally.
Think about that. The market’s rallied a ton, I’m getting crushed on SPY spreads, but my VIX puts have barely moved. That tells you everything about how artificially elevated this volatility is.
The Trade That Could Make Your Head Spin
So here’s what I’m looking at right now. August VIX puts – when this artificial volatility floor collapses, these could move so fast it’ll make your head spin.
I believe we’ll get relief one way or the other after July 9th. If Trump pushes this out another three months, VIX should drop to about 14. If he makes a deal, same result.
The 9-day VIX is already at 12.85.
We’re sitting at levels that show the underlying market is actually behaving like a bull market, but we’re not getting the requisite volatility drop with it.
Why This Reminds Me of 1999
This year has set up some unique circumstances. Normally you would see volatility drop with this kind of sustained rally. But traders are so worried about being surprised by Trump again that they’re keeping this artificial floor under VIX.
The good news is we have until after July 9th. Nothing’s gonna happen till then unless Trump gets happy over the weekend and makes some nice trade deals.
But at this point, it’ll be very hard for traders to keep the volatility up there once we get resolution.
The Action: Target August VIX puts when this artificial volatility floor collapses post-July 9th. As VIX normalizes to its mathematical level around 14.50, these positions could deliver substantial returns.
Set your alerts for any Trump tariff news, but don’t expect major moves until his July 9th deadline resolves this uncertainty.
Andrew “Somethings Gotta Give” Giovinazzi
P.S. Speaking of bizarre market activity – Licia’s pitchforks have been nailing these exact inflection points. If you’re gonna trade this VIX setup, you need to see this limited time offer here.