'Fear gauge' VIX is starting to attract hedges into historically volatile part of calendar
Big moves in Treasury yields over the past couple of months have led to a renewed focus on the CBOE Volatility Index and the Merrill Lynch Option Volatility Estimate.
Investors are turning to protective strategies as a historically volatile stretch of the market calendar draws near, prompting a noticeable uptick in demand for hedges against potential swings.
VIX Rising Fear Gauge
The Cboe’s VIX, often labeled Wall Street’s “fear gauge,” reflects the level of volatility investors expect in the S&P 500 over the next 30 days, derived from options pricing. When market participants grow uneasy, the index typically climbs, signaling heightened uncertainty, while calmer periods see it drift lower.
Seasonal September October Volatility
September and October have long been identified as months when the VIX spikes most sharply after the mid‑year lull. That seasonal pattern now intersects with several additional pressures: the U.S. midterm elections, interest‑rate risk tied to oversupply dynamics, hawkish signals from central banks, and a recent flare‑up of hostilities in the Middle East. Nomura’s Charlie McElligott described the confluence as a “negative risk trinity,” suggesting that investors are increasingly motivated to lock in protection.
Equity investors, according to McElligott’s Wednesday note, have begun moving cash back into the market and now “have something to hedge against.” He highlighted that the VIX three‑month call skew sits in the 91st percentile, indicating that betting on a rise in U.S. equity volatility over the next few months has become relatively expensive.
Equity Investors Hedge
Luke Rahbari, chief executive of Equity Armor Investments, warned that as the year‑end approaches, both upside and downside equity‑market volatility are likely to intensify as rate expectations shift and cross‑asset pressures mount. He also observed early signs that stress in Treasury markets is spilling over into equities.
The MOVE Index, which gauges Treasury‑option volatility, has remained elevated while bond markets wrestle with evolving expectations about rate cuts, inflation trends, and Treasury supply. Both the MOVE and the VIX are hovering near their ten‑year averages, and corporate credit spreads remain historically tight, noted Zachary Griffiths, head of IG and Macro Strategy at CreditSights. He added that volatility could be pushed higher as markets move beyond the summer slowdown.
James Ooi, a market strategist at Tiger Brokers, pointed out that volatility historically eases in November, with the VIX typically falling about 4% once midterm results remove a key political overhang and provide clearer policy direction. As the calendar advances, investors appear poised to maintain heightened hedging activity, keeping the VIX in focus throughout the season.
Source: CNBC · 2026-09-10