After September was declared the lowest volatility month on record, October is starting auspiciously, if only for the vol sellers.
After last week stocks rose again on renewed hopes of a Trump tax deal and following a payrolls report which showed the hottest wage inflation since the financial crisis, the S&P 500 closed the week 1.19% higher, while the Russell 2000 added 1.30%, the NASDAQ 100 increased 1.43%, and the Dow gained 1.65%.
Vol - VIX - Points - Friday - Thursday
And while implied vol limped up slightly week-over-week as the VIX increased 0.14 points to 9.65 last Friday, this was the eighth consecutive close below 10. However, on Thursday the VIX closed at 9.19, the lowest close of all time. The trend appears set to continue, because as Bank of America's derivatives expert Benjamin Bowler writes while October tends to have the highs volatility of all months of the year, this time is different and currently the annualized month-to-date realized vol for the S&P is 5.22%, the lowest October we've seen on record spanning back to 1928. For comparison, the median SPX realized vol in October is 17.22%, while the 1st percentile is 6.15%. Interestingly, the other four lowest vol Octobers were all in the 1960s ('61, '64, '65, and '68), the period prior to "The Great Inflation" and rapidly rising rates of the 1970s.
Implied vol remains similarly low as the VIX has closed below 10 every day so far in October except for Monday, 9-Oct, and in fact, closed at a record low 9.19 on 5-Oct. Not only is this remarkable on the surface, but is also even more notable given that seasonal trends tend to result in October vol being amongst the highest of all months.
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