Investment and Options Strategist
Summary: The S&P 500 closed at a fresh record on Wednesday - yet the options market was paying nearly double the implied volatility for downside protection versus upside exposure. In today’s Saxo Options Brief, I break down what’s driving it, and two practical strategy insights
The S&P 500 closed at a fresh record while the options market quietly doubled down on downside protection — and oil’s fourth straight gain keeps the geopolitical pressure on.
Wednesday’s session delivered a split result: US equities pushed to new highs on strong earnings from technology and industrial names, while European markets retreated under the weight of rising energy costs. The dominant driver behind both moves was the same — Strait of Hormuz disruption. Iran fired on at least three vessels on Wednesday, and although President Trump announced an indefinite ceasefire extension, Tehran has signalled no intention to negotiate. Brent crude rose for a fourth consecutive session to around $103 per barrel. The S&P 500 finished at a record 7,137.90 (+1.05%), the Nasdaq 100 added 1.73% to 26,937.27, and the Dow Jones rose 0.69% to 49,490.03. Underneath the headline gains, the options market tells a more cautious story: put options on the S&P 500 are priced at nearly double the implied volatility of comparable calls, a persistent signal that institutional money is buying insurance even as the index climbs.
Strait of Hormuz tensions keep oil rising; strong US earnings offset the geopolitical drag — but the picture is more fragile than the headline numbers suggest.
Oil and geopolitics. Iran attacked at least three commercial vessels in the Strait of Hormuz on Wednesday. President Trump announced an indefinite ceasefire extension, but Tehran has made clear it has no interest in negotiations. The US also faces a hard deadline: under the 1973 War Powers Resolution, Congress must authorise military operations by 1 May, or they must wind down within 60 days. Brent crude extended its run to four consecutive days of gains, reaching approximately $103 per barrel. WTI crude currently trades at $94.49, up 1.65%. The energy-price increase is acting as a direct drag on European corporate margins and consumer confidence, which explains why the STOXX 600 and DAX weakened even as Wall Street strengthened.
US earnings providing the offset. A strong earnings session on Wednesday more than neutralised the geopolitical noise for US equities. Micron gained 8.5% on AI-driven demand, GE Vernova surged 13% on data-centre power demand, Boston Scientific rose 9.0%, and Boeing added 5.5%. The pattern is consistent: companies with direct exposure to AI infrastructure or defence are seeing outsized moves. Today’s earnings slate includes Intel, American Express, Honeywell, Blackstone, and Lockheed Martin — names that collectively span technology, financials, industrials, and defence, and will test whether Wednesday’s momentum has legs.
US equities at records; Europe softens; oil rises for a fourth straight session.
Market pulse: The US–Europe divergence is the story. Strong earnings are holding up US indices at record levels, while rising energy costs are putting quiet pressure on European earnings expectations — a split that is unlikely to close until the oil situation resolves.
Records on the surface, caution underneath — and two practical setups for navigating it.
VIX — the market’s main gauge of expected volatility — closed at 18.92 on Wednesday, a modest step down from 19.50 the day before. At face value that looks calm, but the details tell a more cautious story. Near-the-money put options on the S&P 500 are priced at around 25% implied volatility, roughly double the 13% implied volatility of equivalent call options. In plain terms: the options market is paying nearly twice as much to protect against a drop as it would cost to bet on further upside — even with the index at record levels. This gap, known as put-call skew, is a persistent signal that institutional money is quietly buying insurance.
The shape of the VIX curve adds context. The 1-day VIX (which measures expected volatility over the next 24 hours only) has dropped sharply to 12.28 (–24.20%), meaning the immediate event risk from the ceasefire announcement has been priced out. At the same time, front-month VIX futures remain above 20 at 20.65, and equity put-call ratios fell around 14–19% on the day — consistent with some unwinding of hedges as the rally gathered pace, but not a full clearing of protective positioning. The short end of the vol curve is calm; the medium term is not.
Important note: The strategies and examples provided in this article are purely for educational purposes. They are intended to assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor or trader must conduct their own due diligence and take into account their unique financial situation, risk tolerance, and investment objectives before making any decisions. Remember, investing in the stock market carries risk, and it’s crucial to make informed decisions.
Strategy Insight - Put spread rather than outright puts. The wide gap between put and call implied volatility makes straight put purchases expensive right now. A put spread — buying a put at one strike and selling a put at a lower strike simultaneously — delivers similar downside protection at considerably less cost. The trade-off is that your maximum profit is capped at the difference between the two strikes, but you also define your maximum loss upfront and significantly reduce the drag from elevated put premium. It is a better fit for an environment where the direction of risk is clear (oil, geopolitics) but the timing is not.
Strategy Insight - Covered calls on big earnings winners. Micron gained 8.5% and GE Vernova surged 13% on Wednesday’s earnings. For investors already holding these stocks, the post-earnings spike in implied volatility creates a window. Selling a covered call — agreeing to sell your shares above a target price in exchange for premium you collect now — lets you monetise elevated implied vol before it deflates. Post-earnings implied volatility compresses quickly once the event has passed, so the days immediately after a strong earnings move tend to be the best time to sell. It is a straightforward way to improve the return on a position you intend to hold.
US equities are at records, yet the options market is still pricing a meaningful premium for downside protection — a divergence that tends to resolve eventually, either through a pullback or a vol crush as uncertainty clears. Oil remains the swing factor: the Strait of Hormuz situation is unresolved, and the War Powers Resolution deadline of 1 May gives the geopolitical situation a hard near-term endpoint. Today’s session brings Flash PMI data for Europe and the US (a read on how the oil price is feeding through to broader economic activity), weekly jobless claims, and earnings from Intel, American Express, Honeywell, and Blackstone — all capable of moving the dial on sentiment. The earnings-driven momentum from Wednesday needs fresh evidence to sustain it.
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