Your Week’s Volatility Market Commentary — Make Information Your Edge

The Weekly Takeaway:

• The S&P 500 gained 1.92% for the week and made another new all-time high on Friday. The index is now up 15.47% for the year;
• The Nasdaq-100 gained 2.18% for the week. The index is now up 20.68% for the year;
• S&P 500 VolDex (ticker VOLI) closed at 13.09, a decline of 21.43% for the week. VolDex’s closing value is the 11th percentile of its 52-week range;
• S&P 500 TailDex (ticker TDEX) closed at 15.42, a decline of 27.37% for the week. This week’s close is the 17th percentile of its 52-week range;
• S&P 500 RiskDex fell by 39.58% as CallDex rose and PutDex fell. RiskDex is the ratio of PutDex (normalized price of 1 standard deviation out-of-the-money put) to CallDex (normalized price of 1 standard deviation out-of-the-money call) and is a measure of fear;
• VolDex on the Nasdaq-100 fell by 18.71% this week. It closed at the 13th percentile of its 52-week range;
• TailDex on the Nasdaq-100 fell by 18.85% to close at 15.92;
• The yield on the Treasury notes fell by another 1.0 basis point and ended the week at 3.997%. That is the first weekly close below 4.000% since March;
• Most volatility measures on Treasury bonds fell on the week but TailDex rose 9.00%. Treasury Bond VolDex and PutDex both closed at the 1st percentile of their respective 52-week ranges. Treasury Bond PutDex closed at the 7th percentile of its entire history back to 2014;
• Nearly every measure of bitcoin volatility fell this week. The decline in Bitcoin VolDex is the first in 5 weeks;
• Gold fell 3.12% for the week thanks to a loss of 5.48% on Tuesday. Every volatility measure in gold fell on the week;
• VolDex was generally lower for nearly all the equity names we cover. The exceptions were NVDA (+1.78%) and WMT (+10.77%). TSLA VolDex fell 15.30% after the company released its 3rd quarter earnings results;
• The Nations Indexes Optimism Index® rose by 29.88% to close at 79.98;
• You can always learn more about all of our indexes at Learn More About Our Indexes
• We have added an interesting segment to our some editions of our weekly Volatility Insights. Trade Spotlight will describe an interesting trade opportunity based on our index values and other metrics like readily available momentum measures. These are not trade recommendations but illustrate another way to use our volatility indexes. Be certain to check it out when we offer it.

Equity Index Volatility:

The S&P 500 gained 1.92% this week and was in the green every day except Wednesday.

S&P 500 volatility displayed a pronounced bias for calls and away from puts as you can see below in our Option Window®.

TailDex fell by 27.37% to close at 15.42 as fear of a steep decline in the S&P 500 faded.

RiskDex fell by 39.58% to close at 3.54 after strong rallies earlier in the month. It is now below its historical (1/31/2005 thru 10/24/2025) average of 3.75.

Historical metrics (Average, median, 10th percentile, 25th percentile, 75th percentile, and 90th percentile) for all out indexes are available to subscribers at NationsIndexes.com.

Why It Matters…Historical data for all our indexes is available to subscribers at the Everything! level and they allow option traders to understand the context of the current option pricing environment – the current environment, while not unique, is unusual. Volatility is mean-reverting and that is a phenomenon traders can take advantage of in both directions. But you have to understand what normal is, what the “mean” is, in order to do so.

Nasdaq-100 VolDex fell by 18.71% to close at 17.84, the 13th percentile of its 52-week range.

Nasdaq-100 CallDex rose by 6.65% to close at 26.88 which is still just the 28th percentile of its 52-week range.

Why It Matters…Traders have to have the objective data provided by our indexes to trade in a way that doesn’t rely on hunches or guesses.

Nations Option Window®:

Our Option Window® graphic shows the impact of buying and selling of S&P 500 options at each point on the skew. Moneyness as defined by standard deviations from at-the-money is constant as is the precisely 30-day time to expiration.

You can see that option activity was heavily skewed toward selling every strike below 0.5 standard deviations above at-the-market. That corresponds to approximately 6915 in the S&P 500.

Nations Investor Optimism Index®:

The Investor Optimism Index rose by 29.88% to close at 79.98.

The index takes into account the current levels of S&P VolDex, TailDex, and RiskDex and compares them to their rolling 2-year ranges. It is plotted on a 0 to 100 scale.

Our Optimism Index is now available in real-time on our home page at NationsIndexes.com.

1DTE Options:

S&P 500 1-Day VolDex fell by 24.73% to close at 8.77 after falling 35.34% during the previous week. This week’s close was the 5th percentile of its 52-week range.

Very short-dated volatility measures which use a variance swap methodology, as 1-day VIX does, inject significant error into the resulting measure because of the way out-of-the-money options trade in the hours before expiration. The VolDex at-the-money methodology is particularly suited for these very short-dated tenors.

Other Asset Volatility:

Treasury Bonds and Notes:

The yield on 10-year Treasury notes fell again and closed below 4.000%. Investors are confident that interest rates are going to continue to fall as the market is saying that the odds for the Federal Reserve to cut by another 25 basis points at next week’s meeting are 97%.

Nearly every volatility measure for treasury bonds fell again this week. Option prices for Treasury bonds are historically low and traders should take advantage when placing directional bets.

Why It Matters…We still believe the ability to buy at-the-money Treasury bond options at historically low prices is a unique opportunity given the risks currently present. Long volatility structures are the correct approach. Short volatility structures should be avoided.

Traders should always focus on making the smart trade. Not all of those trades will be profitable and recent long volatility trades in Treasury bonds have not been profitable but with Treasury bond volatility metrics at historically low levels and many potential hazards for Treasury bond prices, long volatility structures are advisable and short volatility structures are to be avoided.

Bitcoin:

Bitcoin rose this week, gaining 3.69%, and Bitcoin volatility finally fell.

Two weeks ago we noted that “Traders will be watching for opportunities to short bitcoin options if Bitcoin VolDex recaptures the 50 level.” Bitcoin VolDex closed at 50.04 last week and traders who took advantage and shorted Bitcon volatility did well as Bitcoin VolDex fell by 11.59% to close at 44.24 this week.

Precious Metals:

The rally in precious metals finally broke down as gold lost 3.12% and silver lost 4.38% on the week. Silver closed 9.96% below the week’s high. The volatility action in precious metals was particularly interesting this week as volatility fell across the skew and term structure for both gold and silver as the mania ebbed.

Gold puts declined in price despite the break in the price for gold.

Silver gave back nearly all of last week’s gains and silver volatility was lower.

Equities:

We have expanded the list of single names we cover to include the most dynamic stocks in the S&P 500 and the stocks with the highest option volume but also the largest names in the S&P 500.

Nearly every equity we cover gained ground again this the week with the exceptions of TSLA, BRKB, and WMT. AMD was once again the big winner with a gain of 8.51% following gains of 8.46% and 30.50% in the precious two weeks. AMD is the only asset or name we cover which is technically overbought (i.e., RSI above 70).

WMT continues to be weak and the put spread purchase we illustrated on October 15 generated a small profit when we described how some traders would close the position.

VolDex was generally lower on the equities we cover in sympathy with the broad market. WMT bucked the trend as WMT VolDex gained 10.77%.

Volatility metrics in WMT were generally higher this week with VolDex, CallDex, and PutDex all gaining ground. WMT shares were hurt by concerns about competition from AMZN, the impact of inflation, and the specific economic situation for WMT’s core customers in the face of what seems to be a slowing economy.

AVGO shares rose just 1.37% for the week and trailed the gains in AMD and NVDA. AVGO CallDex ended the week at 103.48 vs. 179.38 for AMD and 109.45 for NVDA.

Scott’s Weekly Commentary: