By Huo Huo
After the close on Aug. 4, Wall Street was looking at a stretch of price acceleration that was hard to ignore. The S&P 500 rose a cumulative 5.8% over the four trading sessions through that date. Reuters reported that the options market also showed a bullish reading rarely seen in at least four years.
A four-session climb that outpaced roughly three months of closing-range movement
A rally on its own is not the same thing as FOMO. What made this move look different was how quickly prices moved higher, and how the options market was pricing both upside and downside risk at the same time. Closing data collected in FRED on Aug. 4 showed stocks still rising while the Volatility Index, or VIX, which tracks expected volatility, also moved up. Optimism did not bring volatility pricing down with it.
Using daily S&P Dow Jones index closing data carried by the St. Louis Fed’s FRED database, the article says the upward move over those four sessions slightly exceeded the point difference between the highest and lowest closing levels recorded over roughly the prior three months, measured on the same closing basis.
The comparison does not treat a four-day return and a three-month high-low range as the same metric. One captures direction. The other captures range. Set side by side, they show a shift in trading tempo: a band of closing-price fluctuation built over months was overtaken by a one-way move in just four trading days.
The move was rare in a 10-year sample
A price path cannot prove what every participant was thinking. It can show that four straight higher closes quickly raised the entry price for anyone coming in later. Reuters described traders chasing the rally as FOMO, and the speed of the move is the part of that claim that can be tested against the price series.
A rolling calculation based on nearly 10 years of daily S&P 500 closing data in FRED produced 2,504 four-trading-day windows. This round’s 5.7458% gain landed in the 99.32 percentile, putting it in the sparse far-right tail of the chart.
Based on the FRED data, only 18 windows, including the current one, posted a four-day gain at or above that level. Moves of that size over four sessions have not been common.
The index and the VIX both rose as options still priced in risk
Using closing data from S&P Dow Jones indices and the Chicago Board Options Exchange, or Cboe, as carried by FRED, the S&P 500 rose 1.79% while the VIX climbed 4.04%. With both moving in the same direction, the market had not fully marked down the price of future volatility by the end of that trading day.
Reuters also reported that the call skew in short-dated options reached a two-year high. Data from options analytics firm Trade Alert showed the average daily one-month S&P 500 call-to-put ratio at 0.9, placing it in the most bullish zone seen in at least four years.