Lesson 17
📘 1. Lesson Overview
This session explores the concept of spot-vol correlation—the relationship between an asset’s price movement and changes in implied volatility. Using SPX and VIX as primary examples, we walk through how correlation works, when it breaks, and how traders can use patterns like the Monday effect, Over VIX, and liquidity-driven vol spikes to better manage their strategies.
🎯 2. Key Concepts / Learning Objectives
- ✅ Understand the meaning and measurement of spot-vol correlation
- ✅ Learn about Over VIX and Under VIX market reactions
- ✅ Recognize patterns like the Monday effect and volatility decay
- ✅ Differentiate volatility behavior between SPX and individual stocks
- ✅ Identify risks in assuming VIX behavior reflects your option position
🧩 3. Detailed Recap (Thematic Outline)
1. What is Spot-Vol Correlation?
2. Over VIX and Under VIX
3. Monday and Friday Effects
4. Liquidity Events and Dealer Behavior
5. Volatility Event Reactions
6. Correlation Strength by Ticker
7. Option Position Risk Caveats
💬 4. Discussion Prompt
Have you ever misjudged volatility behavior because your position didn’t match the VIX timeframe? What will you adjust after understanding the Monday effect and spot-vol correlation better?
📎 5. Resources
(Include VIX/SPX correlation charts, spreadsheet models, Monday decay reference tables, and sample trades affected by vol shifts.)