Editor's Note

A broad rally and a sharp fall in volatility lifted the account 31.94%

On Monday the market extended Friday's rebound from last week's AI-led sell-off as a sharp drop in oil prices eased inflation worries. The S&P 500 rose 2.35% to 7,549.94, its biggest daily gain since 8 April, SPY 2.37% to 752.69, QQQ 3.54% to 679.35 and the Nasdaq-100 3.40%. The equal-weight S&P 500 (RSP) gained 2.27% and the equal-weight Nasdaq-100 (QQEW) 3.90%; all 11 S&P 500 sectors rose. Chipmakers led: the Philadelphia Semiconductor Index rose 6.9%, AMD about 13% and Broadcom 8.78%, while Nvidia fell 4.27% after its board announced an independent investigation concerning its chief executive. Tesla rose 5.54%, Meta 5.12%, Amazon 2.94%, Microsoft 2.75% and Apple 2.43%. Brent futures settled 5.85% lower after the U.S. President said renewed attacks on Iran were highly unlikely while talks continued. Front-end Treasury yields rose before the October CPI: the 2-year yield rose to 4.56% and the 10-year to 4.88%. Chicago Fed President Goolsbee and Richmond Fed President Barkin both pointed to inflation risk.

Volatility fell sharply. VIX dropped 5.72 points to 19.92 (−22.3%), its lowest close since 4 November, and VXN 5.05 points to 28.97; 30-day QQQ implied volatility (own calculations) fell from 30.03% to 24.89%. Puts fell more than calls: 25-delta puts lost 6.31 volatility points to 29.05%, and 25-delta calls 3.60 points to 21.61%. The 25-delta skew narrowed to 7.44 from 10.15 points, and the skew index to 29.9 from 33.8. The front of the curve was no longer inverted: VIX9D/VIX was 0.998 (prior 1.060) and VIX/VIX3M 0.955 (prior 1.042). On the Convexa scale the regime moved from Stress to Tense, and the event modifier was removed. The negative-gamma modifier remained: QQQ closed 1.84% below the model zero-gamma level of 692.10. The IV below realized volatility modifier also remained, as 30-day implied volatility stayed below 20-day realized volatility (35.87%).

The account closed the session 31.94% higher, against a 2.37% gain in SPY. By model estimate, the directional rise in the Nasdaq-100 and the fall in implied volatility for short volatility were the main contributors in roughly equal measure, and time decay added noticeably; the sharpness of the move worked strongly against the account but was outweighed. Week-to-date (9 November) the result was +31.94%, against +2.37% for SPY; November-to-date it was +50.43%, against −0.40% for SPY. Since the start of the public record on 5 August the result was +58.33%, against −2.19% for SPY.

At the close the weekly QQQ straddle priced a move of ±2.47% to the Friday 13 November expiry (range 662.60–696.11), against ±3.86% a session earlier. QQQ closed 0.27% below its 200-day average (681.17); the long-term regime under section 2.9 stayed Bearish. Ahead were the October CPI on 10 November at 08:30 ET, Veterans Day on 11 November (bond market closed per SIFMA; stock and options exchanges open), weekly jobless claims on 12 November and the October PPI on 13 November at 08:30 ET.

Options trading carries a high risk of loss. Past performance is not a reliable indicator of future results. This is a record of a personal account, not investment advice or an offer of any service. The author is not licensed.