Core 1M below eight signals overbought options
The guest argued that when the Cboe Core 1M correlation index drops below eight, it indicates that single-stock call buying is unsustainably overbought, signaling a high risk of an equity market correction.
The argument
This metric measures implied volatility in single stocks relative to the index. When investors aggressively chase single-stock calls and sell index volatility, the metric drops, historically preceding market downturns within a two-to-three-week window.
The thesis, stress-tested
✓ What validates it
- ✓Cboe Core 1M index drops below 8.0 around the May OpEx or NVIDIA earnings date
- ✓S&P 500 puts appreciate as index volatility rises
▸ Risks discussed
- ▸The Core 1M index can remain below eight longer than expected without triggering a selloff
- ▸Implied volatility dynamics may shift due to structural option-selling programs
Hear it yourself
"That's that that doesn't bode well for future Google earnings. Alright? Given the the inverse indicator there. Like, they're they're going in the tank now. Yeah. So, you know, I mean, I but it it was actually interesting. I was at the OCC conference, this past couple of days, which is a real options, insider. I don't wanna call it insider, but, you know, in the weeds. And, even on those panels, it was just every conversation is just about AI, AI, AI, and and you are probably like me where, it's all we talk about. So there is this this major transition, and and that transition to CapEx and and the related AI, industries is is really changing things."
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