SPX Options Positioning Reverses As FOMO Sets In

2026-04-20 15:18:00 ET

By Mandy Xu

Cross-Asset Volatility: Implied volatilities normalized across asset classes last week as momentum built toward a peace deal between US and Iran. Equity, rates, credit, and FX implied volatilities all fell below their long-term averages (see Exhibit 1), with the VIX Index ending the week nearly 2 pts lower to 17.5% - now lower than when the Iran War first started in late Feb. Interest rate volatility fell as inflation expectations declined, as the market reverted back to pricing in Fed rate cuts for the year (currently ~50% implied probability of a cut by Dec). Only oil and gold volatilities are currently still trading at elevated levels, though both still fell meaningfully last week. WTI 1M implied volatility collapsed by nearly 30 pts wk/wk to 47% as oil prices fell below $90/bbl – though notably we still see strong demand for call options with skew remaining inverted throughout the front 6-month tenors. This suggests that despite the widespread optimism of an imminent deal, oil traders still see an elevated risk of a prolonged conflict – a prescient call given the weekend developments....

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