jokerpokerhands| Inflation data and Nvidia's earnings report are difficult to stir. The outlook for option volatility in the U.S. stock market may remain sluggish

Zhitong Financial APP noticed thatJokerpokerhandsFrom inflation data to NVDAJokerpokerhandsUs) performance, one risk event after another.JokerpokerhandsIt has calmed down, and almost no waves have been made to slow the upward momentum of the market. Volatility will only fall this month because of strong demand for option selling.

On Thursday morning, the VIX index fell to its lowest level in nearly five years: 11Jokerpokerhands.5 points, and then rebounded slightly. That level is a few points below its all-time low in 2017, the least volatile stock market in modern history. The three-month implied volatility of the S & P 500 closed this week at its lowest level since October 2018.

The stock market is not alone: oil, bonds, credit and even foreign exchange measures of volatility are slowly falling. OPEC + production cuts have stabilized the oil market within a range. Lower volatility in real interest rates and a narrow outlook for G-10 currencies have brought implied interest rates under control.

Looking ahead, there are few opportunities for accidents in the near future. Earnings season is coming to an end and summer holidays in Europe and the United States are just around the corner. OPEC + representatives expect the organization to extend production cuts until the second half of this year at a virtual meeting to be held on June 2. Most forecasts from Wall Street banks are that the Fed will cut interest rates in September or later.

With the stock market hitting record highs and nothing seriously threatening the rally, investors have little incentive to short the market. Hedging demand is so low that long put positions cannot be rewarded in the event of a shallow fall, which reverses quickly. At the same time, the boom in investment vehicles designed to sell options has pushed down volatility.

The positions of options traders also do little to stimulate greater volatility. Traders do multi-gamma, which acts as a market stabilizer when trading departments sell high and buy low to rebalance their books.

"as the S & P 500 continues to rise, positive gamma is getting thicker and thicker," Spotgamma strategists said on Thursday. " "the higher the gamma value, the narrower the trading range and the less volatile the upside."

At the same time, the number of volatility sellers is growing month by month, and derivatives income funds now have $200 billion in assets under management. They supply the market with more than 250 million vega a month, curbing market volatility in an unprecedented way.

'The calm across the market contrasts with perceived fundamentals, and the surprises of the US economy are now close to the low levels of May 2022, 'wrote strategists at Tier 1 Alpha.

"May 2022 was the middle of the S & P crash, and a few weeks later, we fell from 4800 to 3700. This has not happened in this cycle. This is a good reminder that the market is not an economy. "

2024 is an election year for the United States and other countries, and an important question is how long the low volatility can last. Implied volatility in the Indian stock market rose sharply during the general election this month.

Although low compared with other election years, VIX futures have become more sensitive to the event, with October contracts trading at a premium to September and November contracts. Last week, the volatility of the pound over the past two months intensified because of the risk of a general election on July 4.

Tanvir Sandhu, chief global derivatives strategist at Bloomberg Intelligence, said: "the usual distortions on the VIX futures curve related to the US election happened very early this time."