To The Moon

$Cboe Volatility Index(VIX)$ $SPDR S&P 500 ETF Trust(SPY)$ $NVIDIA(NVDA)$ I’m fully convinced that what we’re witnessing in volatility is historic: a 69% collapse in $VIX over just 20 weeks, the steepest in recorded history. From April’s panic spike above 60 to last week’s close at 14.2, this is the sharpest reversal of fear into complacency markets have ever seen.

I’m confident this is not just noise but a regime-defining shift. The question now: does low $VIX invite risk, or does it reinforce the resilience of equities as we head into a pivotal stretch of Nvidia earnings, macro data, and the Fed’s September decision?

The State of Play: Spot vs Futures

Spot $VIX at 14.2 looks tempting, but I’m here to cut through the mirage. You can’t buy spot $VIX. What’s available:

• $VIX Sep future at 17.2: tradable, but demands a sharp spike just to break even.

• $VIX Oct future at 19.2: even further from spot, unattractive at current term structure.

• Sep 20 calls at $0.90: only pay if spot explodes; otherwise, decay dominates.

I’m tactical when it comes to setups like this, and right now, the curve is steep, making outright $VIX exposure unattractive. As Bank of America noted, VIX calls are expensive relative to S&P puts, and the skew in SPX options makes put spreads a better hedge.

Historical Perspective: What Happens After a $VIX Crash?

The 20 biggest $VIX collapses in 20-week windows since 1990 show strong forward equity returns. On average, the S&P has returned:

• 9.3% over 6 months

• 19.7% over 1 year

• 52.0% over 5 years

This dwarfs the “all other periods” averages. The differential is remarkable: +7.6% outperformance over one year, +27.2% over five years.

I’m focused on this because the data shows that fear unwinds often precede powerful equity advances.

Positioning and Hedging Shifts

Jerome Powell’s Jackson Hole speech reset the tone; the Fed is openly preparing a September rate cut. Equities ripped higher, the Dow logged fresh highs, and the $VIX collapsed.

Calvin Tse, head of Americas macro strategy at BNP Paribas, captured it perfectly: Powell’s speech “made clear that the Fed intends to deliver a ‘fine-tuning’ rate cut at the September FOMC meeting unless the data dictates otherwise.”

Susquehanna flagged flows rolling into SPY protection and gold call spreads, not VIX. Bloomberg Intelligence pointed out: vanilla puts on SPX are more reliable hedges given the speed of VIX reversals.

JPMorgan has warned that Trump’s pressure on the Fed could depress both Treasuries and equities, favouring binary trades (SPX down 5%, yields up 20bps). In Europe, one-month Euro Stoxx puts remain cheap.

I’m watching these cross-market hedges closely because the omission of VIX from the list of hedging favourites speaks volumes: expensive convexity and steep carry costs make VIX calls unattractive.

Technical Context: VIX Then and Now

• Long-term patterns show volatility reverting to mean after every spike, with the April surge above 60 being no exception.

• The 4H view now shows VIX hugging the lower Bollinger/Keltner bands at ~14.8, suggesting compression before the next catalyst.

• April’s panic has already been fully unwound, with $VIX futures term structure in steep contango.

One reason for this steep curve is mechanical: the re-emergence of flows into long, levered VIX ETPs ($2.5B inflows since April, versus $1B outflows from inverse funds). These products rebalance daily, selling shorter-dated contracts and buying longer-dated ones, which forces the curve steeper.

I’m cautious here: the market is buying dips aggressively, and volatility spikes are reversing faster than ever.

The Broader Market Lens

The Dow has posted 348 all-time highs since 2013, surpassing the 1989–2000 bull run. Rolling 12-month S&P 500 returns confirm what every long-term investor knows: volatility is the entry ticket to compounding.

Schroders’ Duncan Lamont reminds us: markets endure 10% corrections almost every year and 20% declines roughly every four years. Yet, over any 20-year horizon, stocks always outpace inflation.

Einstein put it best: “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” The credit card debt vs investment compounding dynamic underscores this truth brutally.

I’m unequivocally optimistic about long-term equity compounding despite turbulence.

Catalysts Ahead: Nvidia and the Fed

The single biggest near-term event is Nvidia earnings. Options are pricing a 5.8% move, in line with recent history. Steve Sosnick nailed it: Nvidia is the most important stock for this bull market; if it fails to validate AI enthusiasm, sentiment could unravel.

I’m positioned to watch how Nvidia sets the tone for broader risk and whether the Fed’s September cut cements the current “buy-the-dip” reflex.

April also set a record for options market activity, with 102 million contracts traded in a single day during tariff-driven turmoil. That volume peak remains a reminder of how violent positioning can flip when macro shocks collide with leverage.

My Conclusion

I’m deeply focused on the paradox: the cheapest $VIX in 2025 is colliding with peak market optimism. Hedging via volatility is expensive and unattractive, but the forward-return data argues that equity gains are still more likely than not.

This isn’t just a trade; it’s a transition in narrative. Volatility has collapsed, fear has evaporated, and the market is daring us to stay invested.

Are you watching this inflection too, or do you think complacency is the real risk now?

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