Hedgers Capitulate As Bullish Sentiment Rises In Options

2025-11-04 04:59:00 ET

By Mandy Xu

Cross-Asset Volatility : Implied volatilities were mixed across asset classes last week on the back of a more hawkish Fed and positive earnings. Bond yields rose as Powell injected more uncertainty into the December meeting (implied probability of another cut in Dec dropped sharply from 96% to now 68%). Rates vol, however, fell following the Fed meeting, with both the MOVE and VIXTLT index falling to a 1-year low. FX volatility collapsed, with 1M implied volatility for EURUSD, USDJPY, and USDCAD all falling to a 1-year lows as well. In contrast, equity and credit volatilities increased last week, even as risk assets ended the week higher. The VIX® index gained 1 pt to 17.4%, while VIXIG index gained 1.6 pts to 30.5 bps vol. Gold volatility continues to screen as the richest cross-asset vol (see Exhibit 1). While GLD implied volatility has started to normalize, realized volatility has continued to increase – as a result, the 1M implied-realized spread declined further, falling to a 12-year low of -16%....

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