FICC Focus All Options Considered: Equity Derivatives With Susquehanna
Oct 10, 2025
In this engaging conversation, Chris Murphy, Co-Head of Derivative Strategy at Susquehanna, dives into the intricacies of equity volatility. He explains the significant spread between VIX and realized S&P volatility and discusses the implications of low stock correlation. The dialogue also covers the rise of single-stock volatility, upside call demand, and how macro volatility selling impacts the VIX curve. Chris's insights pave the way for better trading strategies in a complex market landscape.
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Divergence Between VIX And Realized Vol
- S&P realized volatility is unusually low while VIX stays firmer, widening the volatility risk premium.
- Low stock correlation keeps the index muted even as single-stock moves and single-stock vol rise.
Low Correlation Masks Single-Stock Turbulence
- Single stocks are moving a lot while S&P stays muted because correlations are low and sectors pull in different directions.
- That dynamic explains why VIX remains elevated relative to realized vol as correlation could flip quickly.
Anticipate Market-Maker Hedging Flows
- Recognize that persistent macro-level volatility selling leaves market makers long gamma and mutes large index moves.
- Account for hedging flows that sell underlying into rallies and buy into declines when designing macro option strategies.