The technology sell-off deepened: the account fell 9.45%
On Friday the technology sell-off that began the previous day after the Alphabet results deepened sharply. The trigger was the quarterly results from Intel and Amazon released after Thursday's close: Intel fell 28.6% on weak guidance for the next quarter, and the market again questioned the return on large-scale artificial-intelligence spending. QQQ fell 3.47% to 690.49 and the Nasdaq-100 3.46%, the index's largest one-day decline since June. Chipmakers were hit hardest: Broadcom lost 5.48%, Nvidia 4.22%, AMD 10.9% and the semiconductor index 7.2%. QQQ volume was more than double Thursday's. The S&P 500 fell 1.82% to 7,580.07, while the equal-weight S&P 500 lost only 0.79% as investors rotated into defensive sectors and bonds. The 2-year Treasury yield fell to 4.56% and the 10-year to 4.94%. The Chicago PMI fell to 55.3 from 58.8, below expectations.
Implied volatility rose sharply, most of all in puts. VIX rose 2.22 points to 19.42 and VXN 3.32 points to 28.50; 30-day QQQ implied volatility (own calculations) rose from 21.50% to 25.11%. At the 30-day horizon, 25-delta puts gained almost 3 volatility points and 10-delta puts more than 3.6 points, against 2.3 points for 25-delta calls; the 25-delta skew widened to 7.24 points. The skew index nevertheless eased to 28.8 from 30.4, because the overall level of volatility rose faster than the skew itself. VIX/VIX3M rose to 0.935 from 0.888: on the Convexa scale the regime stayed Normal but moved close to the Tense boundary. QQQ closed 4.85% below the model zero-gamma level (725.68), and the negative-gamma modifier remained in place.
The account closed the session 9.45% lower, against a 1.77% decline in SPY. The main loss came from the lower side of the options structure, which rose sharply in value as QQQ fell and put volatility increased. It was partly offset by short-dated protection, which gained as the market fell and was closed at a profit, by the upper side of the options structure, which lost value in the decline, and by longer-dated protection. During the session the upper side was moved lower and short-dated protection was extended to the next expiry. For the week of 26–30 October the account was up 7.17% (SPY −0.56%); month to date it was down 31.60% (SPY −0.91%), and since the start of the public record on 5 August the result was +5.25%, against −1.80% for SPY.
At the close the weekly QQQ straddle priced a move of ±3.20% to the Friday 6 November expiry (range 668.39–712.59), more than double the ±1.50% priced a session earlier to the 30 October expiry. Ahead were the ISM manufacturing index on 2 November at 10:00 ET and Apple results after the close, the U.S. midterm elections on 3 November, the ISM services index on 4 November and the October employment report on 6 November at 08:30 ET.
Editor’s Note reflects the author’s market perspective at the time of publication and should be read as commentary, not investment advice.