The SPX closed 0.5 percent higher with mega-cap tech stocks underperforming (+0,1%) and an equal-weight basket outperforming (+0.9%).
Striking was the fact that investors seem to remain super-calm ahead of tomorrow’s path breaking FOMC decision, as expressed by the VIX which dropped below 30 percent and the Nations Taildex Index (see chart below) which declined 4.4 points to 18.6 percent.
This particular Index measures the likelihood of an extreme drop in equity prices by creating a synthetic out-of-the-money put option and is signaling that investors do not price in a black swan outcome on Wednesday.
Implied dealer gamma consequently improved by 72MM to -806MM, while put volume was relatively muted relative to earlier days.
Puzzling is also the fact, that the reduced risk-awareness was not a function of declining rate hike expectations aka expectations of a more “dovish” Fed, and future markets continued to price in eleven hikes for the year (see chart below).
Is this the setup for a perfect multi standard deviation event? Or is tomorrow’s meeting overhyped? Discuss!
Striking was the fact that investors seem to remain super-calm ahead of tomorrow’s path breaking FOMC decision, as expressed by the VIX which dropped below 30 percent and the Nations Taildex Index (see chart below) which declined 4.4 points to 18.6 percent.
This particular Index measures the likelihood of an extreme drop in equity prices by creating a synthetic out-of-the-money put option and is signaling that investors do not price in a black swan outcome on Wednesday.
Implied dealer gamma consequently improved by 72MM to -806MM, while put volume was relatively muted relative to earlier days.
Puzzling is also the fact, that the reduced risk-awareness was not a function of declining rate hike expectations aka expectations of a more “dovish” Fed, and future markets continued to price in eleven hikes for the year (see chart below).
Is this the setup for a perfect multi standard deviation event? Or is tomorrow’s meeting overhyped? Discuss!