Volatility and Options

1. Key Metrics

2. Term structure

Every volatility index fell, the short end and Nasdaq most: VIX9D −0.95 (−7.8%), VXN −1.43 (−6.5%), VIX −0.57 (−3.7%), VIX3M −0.31 (−1.7%). VIX9D/VIX fell to 0.759 (prior 0.792); VIX/VIX3M to 0.835 (0.8351 exact). October VX settled 0.505 lower at 17.119 and November 0.156 lower at 17.852, so M1 − spot was 2.28 (prior 2.21) and M2 − M1 0.73 (prior 0.38). VXN − VIX narrowed to 5.71 pts from 6.57. 252-session percentile: VIX 7.1 (prior 17.1), VXN 15.1 (prior 31.7); rank VIX 7.8, VXN 20.5. CBOE SKEW (SPX) rose 5.15 to 154.34. Read: Thursday's spike fully reversed — VIX and VXN are back below Wednesday's levels, with VIX at the 7th percentile of its one-year range. The curve steepened as spot fell more than futures; part of this is the Friday effect, as closing quotes already price the weekend and the short VIX9D falls most. SKEW rising to 154.34 shows the market still paying for S&P 500 tail protection while at-the-money volatility is cheap. At the current VIX3M, a VIX close above 15.10 would return the regime to Normal; above 16.88, to Elevated.

3. Implied vs. realized

QQQ IV30 is 18.01% (−1.18; variance-interpolated between Nov 6 and Nov 13; Cboe cross-check 17.81%) against realized vol of 12.30% (10d, prior 12.27%) and 15.33% (20d, prior 15.47%), a VRP of +2.68 pts (prior +3.72). The IV30 − RV10 gap narrowed to 5.71 pts from 6.92. IV rank/percentile on our own IV30 history is n/a (ten observations); the VXN proxy stands at a 252-session percentile of 15.1 and a rank of 20.5. Realized volatility was unchanged while implied lost more than a point, so the premium compressed against both 10- and 20-day realized. Options remain rich to realized (positive VRP), but the cushion is clearly thinner than a day earlier.

4. QQQ surface & skew

ATM IV by expiry: Oct 12 8.66% (3 DTE, over the weekend), Oct 16 16.84% → 14.69% (weekly = monthly OPEX), Nov 6 19.17% → 17.97% (~30 DTE), Nov 30 19.18% → 18.18%, Dec 31 19.99% → 19.23%. On Nov 6: 25Δ put 20.61% (−1.38), 25Δ call 16.08% (−1.00), skew +4.53 pts (−0.38), RR25 −4.53 pts; wings 10Δ put 24.24% (−1.59), 10Δ call 15.33% (−0.98). The front cheapened most (−2.15 pts to Oct 16 versus −1.20 to Nov 6 and −0.76 to December), and the term structure is back in normal upward slope. The skew decline came from the put wing. Thursday's protection buying partly unwound — the put wing gave back most of its gain. The 8.66% on the Oct 12 series is mainly a weekend effect (three calendar days for one trading session), not a signal; the October 8 inversion priced a single day and expired with it.

5. Expected move

The nearest weekly expiry coincides with the monthly OPEX on Oct 16. ATM straddle (mid) to Oct 16: $12.20 (±1.62%; $14.88 to the same date a day earlier), range 739.07–763.47. QQQ ATR(14) is $9.16 (1.22%); the straddle covers 1.33 ATR over five sessions. The market is pricing a CPI week at only 1.33 daily ATRs — inexpensive for a week with inflation data and the start of earnings season. The top of the range (763.47) sits just above the all-time high of 762.86; the bottom (739.07) is near the 21-day EMA (739.84).

6. Positioning & gamma (model)

Session volume was 7.02mn contracts (prior 10.80mn; calls 3.56mn, puts 3.47mn; put/call 0.98, prior 1.04); 0DTE accounted for 69.3% of volume (prior 66.5%). Open interest on live series (from Oct 12) is 12.05mn; on a like-for-like basis (series from Oct 12 at the strikes tracked on Oct 8) OI rose 367,587 contracts (+4.29%): calls +100,546, puts +267,041. Against total live OI on Oct 8 the change is −196,079, but that base included the Oct 9 series (still 794,306 contracts in the snapshot). Top-5 strikes by OI growth: calls 775 (+9,504), 835 (+8,028), 755 (+7,765), 750 (+7,116), 770 (+4,913); puts 725 (+22,343), 690 (+21,224), 734 (+18,971), 717 (+17,617), 680 (+13,694). Largest declines: calls 880 (−11,553) and 760 (−10,161). Largest OI: calls 800 (208,910), 760 (180,887), 775 (149,976); puts 700 (392,638), 670 (344,528), 680 (272,640). Modeled net GEX is +$0.84bn per 1% (prior −$1.39bn), zero gamma 749.74 (prior 750.09), call wall 760 (unchanged) and put wall 725 (prior 700). By expiry: Oct 12 +0.08, Oct 13 −0.41, Oct 14 −0.07, Oct 16 +1.58 ($bn); 50.8% of gross GEX rolls off by the Oct 16 OPEX. Grid: −1% → −3.20bn, −2% → −5.98bn; +1% → +4.46bn, +2% → +6.63bn. Gamma is positive again but thin: with price within ±0.5% of zero gamma it is transitional under our scale; the negative-gamma modifier applies on a close below 745.99, and gamma turns positive above 753.49. Puts kept adding open interest (725, 690, 734) even as IV fell — protection is being rolled lower rather than closed, and the put wall moved to 725. Positive gamma still rests on a single expiry, the Oct 16 OPEX.

Model assumption: dealers long calls / short puts versus customers (call GEX +, put GEX −); Black–Scholes gamma on each option's IV (from mid prices, forward from put-call parity, r = 4.25%); IV held fixed across the ±5% grid; OI as published by Cboe at the post-close snapshot (Oct 10, 03:44). These are estimates, not observed positions.

7. What Would Change the Regime

• If VIX/VIX3M closes above 0.85 (VIX above 15.10 at the current VIX3M), then the regime returns to Normal.
• If VIX/VIX3M closes above 0.95 (VIX above 16.88), then the regime moves to Elevated.
• If QQQ closes below 745.99, then the negative-gamma modifier applies; above 753.49 gamma turns positive.
• If VRP turns negative (IV30 below RV20; now 18.01% vs 15.33%), then the modifier changes to cheap premium.

Sources

1. Cboe — volatility indices (historical CSV), QQQ delayed option chain (post-close snapshot, Oct 10 03:44)
2. Cboe Futures Exchange — VX daily settlement, Oct 9 and Oct 8
3. Nasdaq.com — QQQ daily history (realized volatility, ATR)
4. Federal Reserve calendar; LiteFinance economic calendar; Digrin and StockHub earnings calendars

Model-based estimates (gamma exposure, dealer positioning) are labeled as such and are not observed positions. This report describes market conditions and is not investment advice.