From Yahoo Finance: 2025-03-23 12:00:00

Investors are wary of Donald Trump’s tariff “Liberation Day” on April 2, but options markets show heightened implied volatility for S&P 500 Index options on March 31 and April 4. Economic data is closely watched amid market swings. Retail investors may further disengage from the stock market, indicating tepid demand for hedges.

Despite a 10% decline in the S&P 500, there was relative calm in the market, with a lack of volatility spikes. Some investors have lightened positions and rotated into other markets, reducing the need for further insurance. The VIX is expected to remain in its current range, with limited investor demand for downside protection.

Options for April 2 imply a similar move to the Federal Open Market Committee, showing realized volatility around event days. Despite recent selloffs, the VIX has shown little reactivity, leading to questions about the effectiveness of long volatility hedges. Investor demand for downside protection is not expected to change significantly in the near future.

Speakers at Bloomberg Intelligence’s Volatility Forum noted the lack of VIX reactivity during the market selloff. S&P 500 puts outperformed VIX calls in recent weeks, suggesting that long volatility hedges may continue to disappoint. The VIX’s sensitivity to S&P 500 moves resembles a market rally seen in 2024, indicating steady demand for downside protection.



Read more at Yahoo Finance: Options Market Focused on Jobs and Inflation Over Tariff Reveal