Oct. 22nd, 2025 Option Outlook

Vol dynamics continue

Good Morning! An uneventful day led to a .22 point SPX gain, so close to completely even on the day, but yet so far.

NFLX earnings came back, and if you read the NFLX earnings substack (subs only), you are looking forward to the open.

Vol dynamics continue to be an issue. After a month of perpetual overpricing of vol, we are seeing spot-vol betas increase. This means rallies are very undervixed and drops are very overvixed. Strong drops cause vol events to be satisfied not long thereafter. These price dynamics are more visible in a full vol plane, and their impacts have been identified in Volland for quite some time. What is Volland showing now?

First, back to this week, as this week’s option surface has been changing quite a bit on an hourly basis, let alone daily. It has reflected the vol pricing of the moment. Yesterday we undervixed for most of the day, and the result was put buying below spot. We saw yesterday in the overvixed environment, calls were bought and puts sold.

Into Nov. opex, we are still seeing very negative vanna, a very bearish outlook going forward.

I see vol traders out there chasing their tails about this vol dynamic. I see option traders perpetually confused. No one seems to have an idea about what is happening, there are just theories. We see in Volland that option pricing has been flipped on its head. Normally, dealers price volatility and option traders take that price and make a decision. Right now, we are seeing a disconnect in dealer pricing where their prices are making customer decisions very easy. We also notice that the dealer pricing is playing catch-up to their positioning. It has been so high for so long that customers have taken advantage, and now dealers are scrambling to get that edge back without having the view that their PnL has suffered from a lot of sold premium. Customers aren’t biting. You need Volland alongside a vol plane to see this play out in realtime. I say with all humility, Volland has the best view on all of this data out of any services out there.