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

The Weekly Takeaway:

• The United States captured Venezuelan President Nicolas Maduro on Saturday and is returning him to the United States to stand trial. It is not possible to gauge the reaction by equity markets yet but expect oil markets to be very volatile in the coming week;
• The S&P 500 fell by 1.03% this week. It gained 16.39% in 2025;
• The Nasdaq-100 fell by 1.71% this week. It gained 20.17% in 2025;
• S&P 500 VolDex (ticker VOLI) closed at 12.38, a gain of 11.93% for the week. That is still just the 5th percentile of its 52-week range;
• S&P 500 TailDex (ticker TDEX) closed at 10.34, a decline of 8.58%. It lost 8.85% on Friday alone. It closed at just the 3rd percentile of its 52-week range but we expect a substantial rally on Monday morning in the wake of the news from Venezuela;
• Important historical metrics for all our indexes including average, median, and critical percentile closes are available to subscribers at NationsIndexes.com;
• VolDex on the Nasdaq-100 rose by 17.92% this week but still finished the week at just the 9th percentile of its 52-week range;
• TailDex on the Nasdaq-100 fell by 9.34% to close at 10.47. The selling in S&P 500 TailDex and Nasdaq-100 TailDex is out of sync with other metrics but might have been caused by unwinding of hedges just after year end. You can learn more about TailDex at Learn More About TailDex;
• The yield on Treasury Notes rose by 5.1 basis points on the week to close at 4.187%. Treasury Bond VolDex finally found its footing and rallied 11.74% this week. We have been pointing out that Treasury Bond options were very cheap. We expect a strong rally in Treasury Bond volatility on Monday morning in the wake of the news from Venezuela;
• Bitcoin gained 2.51% this week yet Bitcoin VolDex gained 1.51%. Bitcoin VolDex is establishing a trading range traders can take advantage of;
• Silver lost 9.30% this week as the furious rally seems to be abating. Silver VolDex fell 14.12% to 64.44 and Silver TailDex gained 42.80% as it rallied to 5.86;
• VolDex for individual names was higher for every name with the exception of WMT (-4.38%). VolDex gained more than 20% on the week for AMZN, AAPL, MSFT, META, and PLTR;
• The Nations Indexes Optimism Index® fell by 2.97% to close at 86.30 which still expresses substantial optimism. Our Optimism Index is always available in real-time on our home page at NationsIndexes.com;
• You can always learn more about all our indexes at Learn More About Our Indexes;

Equity Index Volatility:

The S&P 500 lost 1.03% this week despite a small gain on Friday.

S&P 500 volatility was mixed for the week with VolDex, PutDex, and RiskDex gaining while CallDex and TailDex fell.

The decline in TailDex is striking because it was already very low and selling those deeply out-of-the-money puts cheaply despite a reasonable amount of risk on the horizon, even if the selling was due to unwinding of hedges, seems overly optimistic. We will see how TailDex responds to the action in Venezuela.

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.

The Nasdaq-100 lost ground all 4 days of the holiday-shortened week.

Nasdaq-100 VolDex gained 17.92% and PutDex gained 14.13%.

It is striking that Nasdaq-100 PutDex, which measures the normalized price of the 30-day, 1 standard deviation out-of-the-money put (equivalent to a 16 delta put) rose by 14.13% but Nasdaq-100 TailDex, which measures the normalized price of the 30-day, 3 standard deviation out-of-the-money put (equivalent of a delta of less than 1) fell by 9.34%.

This is driven by option flows rather than value so there was an opportunity for traders here although the market is likely to look very different on Monday.

You can learn more about PutDex at Learn More About PutDex;

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 Investor Optimism Index:

The Investor Optimism Index® fell by 2.97% to close at 86.30.

The index takes into account the current levels of S&P 500 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 Nations Optimism Index.

VolDex Term Structure:

S&P 500 VolDex term structure was very normally shaped on Friday’s close with an upward slope signifying little concern in the near-term. We expect a significant rally in S&P 500 7-Day VolDex on Monday.

1DTE Options:

S&P 500 1-Day VolDex gained 45.74% for the week but that was from a VERY low pre-holiday level.

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:

Volatility metrics for Treasury bonds were higher for VolDex (at-the-money implied volatility) and CallDex (out-of-the-money calls) and lower for PutDex (out-of-the-money puts) and TailDex (deeply out-of-the-money puts) this week.

This signals a strong bullish bias on the part of Treasury Bond traders. We expect bonds to rally sharply when trading resumes in a typical “flight to quality” or “risk off” trade.

Treasury Bond implied volatility remains VERY low as it has been for several weeks despite this week’s rally in VolDex which still closed at just the 7th percentile of its 52-week range. Treasury Bond PutDex closed at the 4th percentile of its 52-week range.

Owning out-of-the-money treasury bond call options can be an effective edge for an equity portfolio since bond prices tend to rise if equities stage a sharp selloff.

We recently noted that, “Treasury Bond CallDex is historically low so investors should consider this trade now.” We will watch this trade on Monday with particular interest.

Why It Matters…For some weeks we have been noting the opportunity to buy at-the-money Treasury bond options at historically low prices. We expect a strong rally in Treasury Bond volatility on Monday. Regardless, short volatility structures in treasury bonds are still to be avoided.

Bitcoin:

Bitcoin rallied by 2.51% this week, all of which came on Friday.

Bitcoin VolDex rose by 1.51% but is still well below the 50 level that vol sellers have been targeting.

Interestingly, Bitcoin put option measures all fell with PutDex falling 4.66% and TailDex falling 10.18%.

Precious Metals:

The fever seems to have broken in the silver market with silver futures falling 9.30% this week. They are now 12.56% below the all-time high made on December 29. It is worth noting that the price action on December 29 constituted a key reversal in that silver traded higher and made a new all-time high before falling and closing lower on the day.

Silver TailDex gained 42.80% for the week as some traders raced to buy very cheap deeply out-of-the-money puts in silver.

Equities:

We have expanded the list of single names we cover to include not only 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.

Equities had a tough week with only AMD, LLY, and WMT gaining. Several names lost more than 1% on the week including PLTR which fell by 11.05%.

VolDex gained for every equity we cover with the exception of WMT.

AMD and TSLA are the only equities we cover with RiskDex readings below 1.00 meaning they are both displaying call skew. Call skew means the market implies more upside potential than downside potential for those names. It is an invaluable tool for divining the market’s positioning.

You can learn more about RiskDex at Learn More About RiskDex.

This weekend’s military action in Venezuela will certainly lead to significant moves once trading in futures opens on Sunday evening and then for individual equity names on Monday morning.

Trade Spotlight:

Trade Spotlight offers specific illustrations of trade ideas that rely on our historical index values and which may also incorporate momentum measures like RSI (Relative Strength Index). In each illustration we provide our rationale for entering the trade and specific entry prices. We update the trade and current thinking about the trade here and in real-time via our X account to help traders and investors understand how to use our indexes more effectively.

This week’s Trade Spotlight revisits our long strangle in TLT.

At 9:56 a.m. on December 23, both CallDex and PutDex on TLT were trading at or below the 5th percentile of their respective 52-week ranges.

Both CallDex and PutDex measure the normalized price of the 30-day, 1 standard deviation out-of-the-money option. That 1 standard deviation threshold corresponds to a 16 delta and the closest expiration to the 30-day tenor in TLT at the time was the January 23 expiry.

We illustrated how one might use this information to buy a strangle in TLT. We’re not normally a fan of buying strangles because they are a low-probability trade but we noted very low option prices and the potential for realized volatility after the first of the year.

So we illustrated buying the 85/89.5 strangle in the January 23 expiry for 0.51. This trade was a loser as of Friday’s close but our rationale was that it was a low-cost/high-potential trade. We will see how it opens on Monday.

Again, this is not a trade recommendation but an illustration of how many traders use our indexes to identify trade opportunities.

We’ll continue to watch the trade and look for other interesting trade setups.

Scott’s Weekly Commentary: