“The 10-Year Hit a 24-Year High. Nobody Is Buying Puts. Are You Watching the Wrong Market?” — listen on Excess Returns.
Brent Kochuba, founder of SpotGamma, joined Jack Forehand on Last Call, the monthly market wrap from Excess Returns, to walk through where options positioning actually sits after the fastest monthly move in long-end yields since 2022.
The 10-year treasury yield rose from roughly 4.75% to about 5.29% through September, a 54 basis point move and the largest monthly increase since 2022, while the 30-year added roughly 39 basis points. On the other hand, this has been barely acknowledged by equities with the VIX consistently sitting near 16. Brent walked through where traders have actually put their money while this was happening, and the picture is one where downside hedging has stayed light, while calls catch the bid across rate sensitive products.
Bond Volatility Is Priced Near Crisis Levels
The IV rank for TLT (the long-dated treasury ETF), reached 100, meaning implied volatility sat at the very top of its one-year range and matched the peak that was set during the tariff turmoil earlier in the year. IV rank measures how rich or cheap options look against their own recent history, so a reading at the ceiling says the bond market has been repricing risk in a hurry. The MOVE index, which tracks implied volatility across treasuries, has moved a long way too, while the VIX has not followed it anywhere.
Call Skew Has The Bid In Rate-Sensitive ETFs
The 25-delta call implied volatility in XLU, the utilities ETF, has been lifting, and HYG shows the same shape, with implied volatility high and skew tilted toward calls rather than puts. When call skew firms, traders are paying up for upside, and in bond proxies that amounts to a position for yields to come back off. Some of that demand is likely dip-buying and some of it is likely a hedge against an existing short bond position, but either way the flow leans the same direction.
Equity Index Options Lean The Same Way
SPY, QQQ, SMH and bitcoin have sat in the opposite quadrant, with low implied volatility and call skew holding the bid. In a genuine risk event that picture would invert, because implied volatility lifts and puts catch the bid as traders pay up for protection to the downside. Relatively few traders have been paying for index downside protection here, which would suggest the equity market has so far treated the rate move as an isolated bond market problem.
Upside Moves Have Realized More Than Downside
One-month realized volatility in the S&P 500 has run around 9% to 10%, and over the past one to three months the index has realized more movement to the upside than to the downside. Declines have arrived as a sleepy grind lower that rarely delivers what puts are pricing, while any relief in yields has produced an outsized rally; about ten days before this conversation, the Nasdaq rose roughly 3% and the S&P 500 roughly 2% in a single session. That combination punishes both sides of the premium-selling trade, since short puts collect little of the move they price and short calls get run over on the first piece of good news.
What Would Confirm Or Break The Read?
Brent sees holding long exposure as reasonable while equity volatility stays cheap enough to hedge around, with the discomfort likely arriving if the market gives up on the idea that yields come back down. We encourage traders to watch two things from here: whether index put skew steepens and equity implied volatility starts lifting alongside bond volatility This would mark the shift in positioning, and whether earnings pull the focus back off rates. Bank results begin on October 13 with the next tranche of tech and AI reports behind them, and Micron’s strong quarter followed by a softer share price suggests expectations have climbed along with the numbers.