Fall in VIX's Relationship With S&P 500 Leaves Vega Underperforming
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An aggressive implied volatility storm has not developed amid the recent declines in global stock market indexes.
The relationship between S&P 500 and VIX has flattened, leaving put spreads on the index outperforming volatility call options. SPX realized volatility remains historically elevated (10-day at the 80th-percentile of the 5-year range) but there’s no sign of extreme downside hedging panic on short-dated skews.