Mandy Xu
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July 7, 2025
Link to Report: Macro Volatility Digest
WHAT STANDS OUT:
- “Spot up, vol up” was the theme last week as implied volatility levels appeared to have found a floor ahead of this week’s key trade deadlines. While the SPX® index rallied 1.7%, the VIX® index gained 1.2 pts to 17.5% driven primarily by higher SPX fixed strike vols. The volatility risk premium also increased, with the SPX 1M implied-realized vol spread widening to 3.4% (80th percentile high).
- In relative value space, what stands out is the widening spread between RTY vs. SPX, where the 3M implied vol spread has jumped from 4.2% to 6.4% over the past month (see chart below). The widening in the relative risk premium of small caps vs. large caps contrasts with what’s going on in the credit market and is happening at the same time as significant skew flattening in RTY, suggesting much of the demand for optionality is coming from the call-side (i.e. a result of bullish positioning in small caps).
- Activity in our Cboe® iBoxx® iBoxx® Corporate Bond Index futures have surged in recent months, with open interest in IBHY (high yield) futures jumping 4.5x year-over-year to a record high of $1.2B while IBIG (investment grade) futures have jumped over 4.4x to $600M. See here for our recent deep dive in the corporate bond futures market, including the key drivers behind this surge in trading activity.
Chart: RTY-SPX vs. QQQ-SPX 3M Implied Vol Spreads
Source: Cboe
