Equity rotation seen in skews. Put skew is concentrated in the large-cap cap-weighted indices: $QQQ (+3.64 vols, 81st pctl) $SPX (+3.84 vols, 77th pctl) closed Friday in the top quartile of their past year on 1M 25d put-over-ATM skew $DIA (+1.81 vols, 64th pctl) $IWM (+2.15 vols, 50th pctl) sit lower

Whether I buy a call or a call spread mostly comes down to how expensive the vol is. When vols are elevated, the calls are just expensive. So I'd cheapen that up with a call spread, selling a strike up where I think the stock's going to struggle to get through anyway. When vol's cheap relative to where it's been, the outright call starts to make more sense, as long as the stock isn't realising much less. You're not overpaying for the move, and you keep all the upside if it really goes. Case in point, $SMH calls don't look bad for year end which implied vol cheap across the whole term structure.

In today's Macro Volatility Digest: 🔹 Cross-asset implied volatilities edged higher as cooler-than-expected core inflation and weak job growth momentarily quelled escalating bond yields. 🔹 Corporate bond volatilities have both continued to climb with investment grade (IG) and high-yield (HY) vols jumping from 6th and 11th percentile lows 2 weeks ago to their 79th and 84th percentile highs respectively. 🔹 French sovereign credit spreads widened sharply over the past week. Get a sneak peek below, and download the full report:

HY Spreads Merton Model - Doomers take a breath please. 1) Yes HY spreads are spiking over the last 4 months. 2) you have to squint to think this is high spreads or stress 3) a merton model using equity vols and levels and corporate leverage tracks spreads pretty well. 4) Corporate spreads are pretty cheap relative to Long term equity "puts" as level and vol and leverage suggests credits are just fine.

Trump and Xi meet Sept 24, and the options market is barely flinching. SPY's term structure shows only a modest bump into 9/25, while implied vols stay quiet for Chinese stocks and tariff-sensitive American retailers. What we're watching:

VIX exp is today at 9:30AM EST, with 42% of total VIX contracts rolling off. Positioning remains broadly the same with MM's still short calls, they'll just have about 1/2 the size. Impacts are likely muted given vols tied to FOMC at 2PM.

Correlation (COR1M, candles) vs Oil (CL, blue) oil up = all stock vols going higher which typically occurs into an equity drawdown. The risk here is that people don't believe the "just two more weeks - straight is open" headlines...