10-Year at a 2007 High, VIX Under 15: Why I'm Selling Fewer Puts Right Now
Most of my feed this week was about the 10-year, and fair enough. On Thursday the yield hit its highest level since June 2007, and the 30-year is now sitting near 5.49%, the highest since 2004. Then stocks went and closed the week green anyway. The S&P 500 and Nasdaq both posted weekly gains, and the Dow snapped a three-week losing streak.
I've been running a sell-put / Wheel strategy on US stocks for over five years. This is one of those weeks where the numbers are telling me to do less, not more. Here's how I'm reading it.
Quick recap
Sept 16: Fed hiked 25 bps in a 12-0 vote, to 3.75%-4.00%. First hike since 2023.
The dot plot showed most officials expecting at least one more hike this year.
Sept 23: hot S&P Global flash PMIs (services 58.7, manufacturing 56.7) plus a weak 5-year auction pushed the 10-year up more than 13 bps in a single day.
Friday: 10-year around 5.16%, 2-year around 4.86%.
CME FedWatch has another 25 bps hike at the Oct 27-28 meeting at roughly 66-70%.
UMich one-year inflation expectations jumped to 4.6% in September.
And VIX closed Friday at 14.87.
That last number is the one that matters if you sell puts.
The mismatch: bonds are nervous, stock options aren't
The MOVE index, which tracks Treasury volatility, jumped to about 95 on Sept 23. VIX that same day was around 15. So the rates market is pricing real stress while equity options are pricing calm.
A short put is basically an insurance policy you're selling. Your income is the premium. When VIX is under 15, insurance is cheap, so you carry the same downside for less money. My rules need IV Rank at 40% or higher and implied vol at least 1.2x historical vol before I open anything. On most names I follow, IV Rank isn't close. So the answer is simple. No trade.
Cash just raised the bar
This is the part a lot of people skip. The cash securing your put isn't free money sitting idle. With Fed funds at 3.75%-4.00%, short T-bills pay close to 4% a year for doing nothing.
Illustrative example: sell a 30-day put on a $100 stock, $95 strike, collect $0.80. That's 0.84% on $9,500 of collateral for one month, roughly 10% annualised. Looks decent. Now take away the ~4% that same cash earns in T-bills. What's left is about 6% a year as your real pay for agreeing to buy the stock after a 5% drop. That's thin for the risk.
Higher rates also trim put prices directly. In option pricing, puts lose a little value when rates rise. On 30-45 DTE contracts the effect is small, but it pushes the same way as low IV: less premium for you.
What higher yields do to the stocks underneath
Most of my list is growth. $NVDA, $AMZN, $AMD, $PLTR, $NOW. These are long-duration assets. A big chunk of their value comes from cash flows years out, and the 10-year is now about a full point above its February low. When the discount rate moves like that, these are the first names to reprice.
If I get assigned, I want it on a stock I'm happy to hold at a price that still makes sense if 5% yields stick around for a year. That's why the 200-day SMA is a hard gate for me. Below it, I don't sell puts on the name, full stop.
What I'm actually doing
No new puts unless every gate passes. Right now most don't.
Open positions keep the 50% GTC close. When one fills, I take it and don't reload into low IV just to stay busy.
Idle cash sits in short T-bills. Waiting finally pays about 4%, so patience has a real return.
When I do sell, strike = the lower of the 1 standard deviation floor or the nearest key SMA x 0.98, delta 0.15-0.25, 30-45 DTE.
Big tech earnings land around the late-October FOMC. I keep a 7-day pre-earnings blackout, so that window gets crowded fast.
What would change my mind
VIX pushing toward 20+ while the stocks I like hold above their 200-day. That's when premium gets fat and the math flips back in the seller's favour. The best weeks to sell puts usually feel terrible while you're in them. This week felt oddly comfortable, and that's exactly why I'm cautious.
Curious how others are handling it. Are you still selling cash-secured puts here, or parking in T-bills and waiting for vol?
$SPY $TLT $NVDA $AMZN
Not financial advice. Just how I run my own book.
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