Oil Slides as S&P 500 Pushes Toward Record High | Sept 22 Live Trading — watch on tastylive
Brent Kochuba of SpotGamma joined tastylive September 22 on vol expansion, NDX call skew and the dispersion rebuilding across tech.
the market rallied hard yet implied volatility rose with it. That pairing is unusual enough to check what’ sits underneath’s going on in the options market. Brent Kochuba, founder of SpotGamma, joined tastylive on September 22 to break down what’s happening with market volatility, heightened NDX call skew, and a dispersion index that has started to lift once again.
Realized Vol Expanded, Then Normalized
When annualized, the prior session’s S&P move (September 21) saw realized volatility near 24%, against roughly 9% average over the prior month. The options market was not priced for a move that size. One day does not make a trend, but it delivered on the call that realized volatility would expand once OPEX cleared. That also may have led some traders to believe that there could be similar moves in the days ahead, driving up options prices and the associated implied volatility.
The VIX Rode the Skew, Not the Risk
Most of the VIX calculation sits in one-month at-the-money S&P options, so the index slides along the skew curve as spot moves. Near 7,400 those strikes carried roughly 15.9% implied vol. A 2% rally moves the calculation’s weight to strikes marked closer to 12.4%, and the VIX consequently falls. The read therefore comes from understanding fixed strike volatility. Marked against the prior close, vols across the strike grid held higher on the day even as the index gained. By the next day (September 22) implied volatility began coming back down.
Tech Vol Likely to Outrun Index Vol
The gains concentrate in the AI complex, which leaves the S&P with a diversification problem. SPX at-the-money volatility can contract sharply while NDX realized volatility keeps outpacing it, and Brent reads that spread as one that widens rather than closes. The July-to-August drawdown showed the same split in reverse: the Nasdaq gave up about 8% while the S&P fell about 2%. Into quarter end, a fund benchmarked to the S&P cannot keep pace without technology exposure, which pulls more money toward the names already moving.
Dispersion Is Bubbling, Not Peaking
The CBOE dispersion index turned back up as single-stock implied vols expanded, and one-month correlation dropped to roughly 8. Traders are buying single-stock options again instead of index protection, the backdrop a long tech call position wants. The exhaustion combination is different: high IV rank stacked on high call skew across the top NASDAQ components. April and May carried exactly that combination, with the dispersion index at its second-highest reading ever. Two-month NDX call skew still runs well below those levels, and SPY carries a risk-reversal rank near 97 against an IV rank near 7 — traders have crowded into calls, but the options pricing is by no means rich.
A Rolled 0DTE Spread Doubled Its Risk
A recurring 0DTE flow arriving around 10:00 a.m. ran 10,000 lots at 7735 and 7740 into the rally yesterday. As price pressed the short strike, the position rolled up five handles, then five more. Rolling a short call spread higher books a gain on the long leg and widens the gap between strikes, which more than doubles the defined risk. The index closed through both. Today, no single 0DTE contract traded above 10,000 lots. A short spread that is wrong costs less to close than to widen.
What Would Change the Read?
Two conditions should stay top of mind: first, oil staying down and rates easing back keeps the market supported.
We encourage traders to watch three things into quarter end — whether S&P at-the-money vol keeps contracting while NDX realized volatility holds its premium, whether the rich put wing in index options gets sold down as macro headlines settle, and Micron earnings on September 30. Note that for MU, forward implied volatility between the two expirations already sits elevated in the NDX term structure on the Volatility Dashboard. If IV rank and call skew in the top single names lift together toward the May extreme, the setup has stopped being early.
Brent Kochuba founded SpotGamma and contributes to tastylive. He was previously a portfolio manager at Seven North Capital Management, building options-based strategies, and a derivatives broker at Wolverine Execution, Credit Suisse and Bank of America.
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Brent Kochuba appears regularly on tastylive.