Risk premiums have increased since early September due to gold breaking records. The risk premium for options is rising across assets, despite steady or falling implied volatility on benchmark indexes. Factors like rate-cut expectations for gold, supply and demand for oil, and uncertainty around the Fed and corporate earnings are driving market swings. Options volume in equities hit a record in September, with increased expectations of market moves as investors add hedges approaching year-end. Fixed-strike volatility has increased, and implied volatility is elevated compared to realized volatility metrics. The low correlation has kept S&P 500 Index volatility muted, despite single stock volatility rising with the earnings season approaching. The spread between single-stock and index volatility has widened, amid low SPX-implied correlation and high dispersion. Oil has been stuck in a range due to a glut outlook balanced by attacks on Russian refineries, keeping volatility and skew low. The spread between one-month implied and realized volatility for the United States Oil Fund is in the 77th percentile over the past year. Gold is an outlier as implied volatility climbs while bullion surges to record highs. The US government shutdown adds uncertainty, pushing option risk premium to the high end of the range over the past five years. Gold vol risk premiums have not been this high since the early days of the Russia/Ukraine war in 2022. If the rally tops out and gold stabilizes, premiums are likely to come off after the violent swings in September.

Read more at Yahoo Finance: Traders Pay Steeper Price to Hedge Risk From Stocks to Gold