Core 1M sub-eight signals imminent volatility
The guest argued that a Core 1M index reading below eight serves as an extreme signal historically preceding a market volatility event within twenty days.
The argument
The speaker noted that this setup typically coincides with very cheap put options, making short-term S&P 500 puts an attractive hedge. A backtest since 2020 shows a strong correlation with subsequent 2% to 10% market drawdowns.
The thesis, stress-tested
✓ What validates it
- ✓Core 1M index falling below 8
- ✓VIX index spiking from low levels within a 20-day window
▸ Risks discussed
- ▸Time decay on options if the volatility event is delayed
- ▸Small historical sample size for the indicator
Hear it yourself
"about its valuation and fundamentals, but the more interesting part out of the gate might be all the flows it will generate. In the latest opex effect, Jack and Brent Kochuba take a look at what is going on behind the scenes. We have included this episode in the excess returns feed. If you wanna keep receiving new episodes, you can subscribe to the OPEX Effect on all major podcast platforms using the links in this episode description. Thank you for listening. We hope you enjoy the show. What was interesting about SpaceX too is, like, guys like me, we we love, like, fundamental data and all that."
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