Volatility Views 646: Is the Tail Wagging the Dog?

This episode of Volatility Views discusses the recent market volatility, particularly in response to the non-farm payrolls report. Mark Longo and Russell Rhoads (Indiana University Kelley School of Business) analyze the impact of the economic data on VIX cash and futures, highlighting the surprising downturn after an initial market rally. They examine the VIX futures curve, noting the significant spread between the September and October contracts. The episode also delves into a discussion about the explosive growth of options trading volume and whether the options market has become so large that it is now "wagging the dog" of the underlying stock market. They also review VIX option volume for the week, pointing out a high number of contracts traded, including some unusual trades and large spreads. The show concludes with their weekly VIX predictions for the following week. Show Notes: 1:00 Welcome  3:50 Volatility Review: Non-farm Payrolls Report 6:30 Discussion on Market Reaction and Fed Rate Cuts 9:50 VIX Futures and Volatility Surface Analysis 12:40 Conversation about Options Volume Growth and the "Tail Wagging the Dog" 16:40 Discussion on Jane Street in India and Single Stock Futures 18:50 VIX Options Volume Review (Top 10) 21:05 Russell Rhoads' Weekly Rundown (Unusual Trades) 27:50 Host's Breakdown of Daily VIX Volume 30:00 VIX ETPs and Inverse Volatility Products 33:30 The Crystal Ball: Weekly VIX Predictions 36:30 Closing Remarks