Link to Report: Macro Volatility Digest

WHAT STANDS OUT:

• Implied volatilities continued to grind lower as markets rallied to new all-time highs last week, with every asset class vol now trading in the bottom quartile on a 1-year lookback. FX volatility screens as the cheapest, with 1M implied vol hitting a 1-year low for a number of the G10 currencies (e.g. EURUSD, GBPUSD, USDCAD, etc). Within equity vol, Russell volatility remains the standout, with the RVX vs. VIX® Index spread trading in the 88^th percentile high. 
• While index skew has been flat for the majority of the past two years, what stands out is the more recent decline in single stock skew. S&P top 50 single stock skew (3M 90-110%) remained extremely elevated throughout 2022 even as index skew fell to a record low (see chart below) – that divergence has normalized over the past six months as single stock skew has seen a dramatic flattening. Absolute levels are now approaching the extremes we saw in Q1 2021 during the height of the “meme stock” era. The flattening in skew is both a function of falling demand for puts as well as elevated demand for upside calls.

Chart: Index vs. Single Stock Skew

Source: Cboe

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