The options market is implying the S&P 500 Index will move 1.2% in either direction that day, based on the cost of at-the-money puts and calls, said Stuart Kaiser, Citigroup’s head of US equity trading strategy. Should that pricing remain in place by Wednesday’s close, it would be in line with the implied move for August 14 – the next reading on consumer prices – and August 29, the day after Nvidia’s earnings report.
On Wednesday, the S&P 500 was down 0.52%, the Nasdaq 100 slipped 0.77% in afternoon trading.
“We remain surprised by the fast embrace of recession risks with the Atlanta Fed GDP tracking 2.9% and claims this Thursday will be very important,” Kaiser wrote in a note to clients. He said the potential for big swings “also reflects the elevated level of short-dated implied volatility, so likely isn’t pricing explicit event risk as much as macro risk dynamics.”
Traders are looking to the weekly jobless claims figures, due at 8:30 a.m. in Washington on Thursday, for clues as to whether the labor market is weakening further after Friday’s jobs report showed that the unemployment rate rose to an almost three-year high in July. Volatility is already at a heightened level following a broad market selloff that briefly pushed the S&P 500 on the brink of a correction, or a nearly 10% drop from its July 16 all-time closing high.