The October 1 session was another day of rising implied volatility in the wings of the surface. Volatility moved in both directions through the day. The most telling stretch came mid-session: following remarks by Fed Vice Chair Jefferson, yields and volatility declined, the market stabilized, and the portfolio immediately showed a meaningful mark-to-market gain.
Into the close, amid reports of U.S. forces being deployed to the Middle East, volatility rose again and the session ended with a loss consistent with that repricing. The behavior of the surface suggests the market is building in a premium ahead of a forthcoming event; we expect it to materialize in the near term.
Editor’s Note reflects the author’s market perspective at the time of publication and should be read as commentary, not investment advice.
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