The Front End Emptied, The Back End Held - Options Brief - 5 October 2026

Author: Koen Hoorelbeke, Investment and Options Strategist

Summary

The article discusses the recent movements in the options market following the release of the September payrolls report. The immediate aftermath saw a significant drop in the prices of short-term options, while longer-term options remained relatively stable. This indicates a localized relief effect from the payrolls report, with the extreme volatility not diminishing.

Market Overview

The market regime is characterized as a low volatility bull phase, with the VIX at 15.31 and a term structure in contango. The key findings from the options market include:

• VIX1D fell by 22.31%, VIX9D by 13.86%, and VIX3M by 3.07%, indicating a sharp decline in short-term volatility.
• The curve returned to normal levels, with VIX3M to VIX at 1.176, close to its 60-session median.
• Rate volatility remains an outlier, with the MOVE index at 107.30, significantly above its median of 76.11.

Economic Indicators

The September employment report revealed a payroll increase of only 29,000, falling short of the 84,000 consensus, and a revision down of 60,000 in the previous two months. Unemployment ticked up to 4.2%. Consequently, the market reduced the probability of a Federal Reserve rate hike in October to 20%.

There is a divergence in views within the Federal Reserve, with Vice Chair Bowman suggesting no immediate need for action, while Dallas Fed President Logan advocates for a further 50 basis points increase.

International Markets

In Europe, the euro reached a new cycle low against the dollar, influenced by fiscal concerns in France and widening sovereign spreads. The German-French ten-year spread peaked at 159 basis points before settling at 141.

On the US markets, the S&P 500 rose by 0.73%, the Nasdaq 100 by 1.00% (setting a record close), and the Dow by 0.49%. The semiconductor sector led gains, with notable increases in stocks like Tesla and Nvidia.

In Asia, the Nikkei 225 rose by 2.22% due to semiconductor strength, while other markets remained unchanged due to holidays in mainland China and South Korea.

Commodities and Rates

Brent crude oil traded near $101.51, while gold and silver prices showed slight fluctuations. The ten-year yield stood at 5.264%, with the two-year at 4.808% and the thirty-year at 5.615%.

Options Market Dynamics

The options market exhibited a neutral flow, with near-dated call supply being the only notable behavior. The largest call lines were primarily bid-side, while put buying was more prevalent in other areas. The overall sentiment indicated a lack of directional bias.

The expected move for the week was set at a range of 7,634.71 to 7,810.73, reflecting a 1.14% potential movement either way.

Conclusion

The article emphasizes the current state of the options market, highlighting the disparity between short-term and long-term volatility. The upcoming week appears to be relatively quiet, with limited economic data releases, suggesting that the market may remain in a holding pattern until further developments arise.