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Has the Federal Reserve Taper Already Impacted Volatility Markets?
Thursday, December 9, 2021

The term structure of S&P 500® Index option implied volatility (IV) changed dramatically at the end of November. The new COVID variant and surprisingly hawkish rhetoric from the Federal Reserve (the Fed) drove IV higher across tenors from one week to one year. All tenors featured IV above 20 at the end of the month, while one week IV increased by nearly 150% on November 26, resulting in an inverted IV curve.

The other notable aspect of November’s IV curve shift is how it compares to the shift witnessed in September. September’s shift was similar but not as extreme. This is notable because the equity market’s 4.97% drawdown that accompanied September’s IV curve response was larger than November’s 2.89% drawdown.

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Only time will tell whether the shift in IV pricing represents investor overreaction to the new COVID variant and Fed rhetoric. However, as we noted in our October “Market Perspective: What Will Taper Do to Implied Volatility?” a spike in volatility at the onset of a Fed taper is not unprecedented. In retrospect, some of the volatility spikes that were concurrent with the Fed tapering asset purchases can be characterized as overreactions while others started phases of above-average volatility.

As always, Gateway will look for opportunities to take advantage of the current environment while vigilantly preparing to take appropriate action should conditions change.

*For more information and access to additional insights from Gateway Investment Advisers, LLC, please visit

November 2021 Market Perspective



  • U.S. Market Recap
  • U.S. Market Perspective
    • Too Much of a Good Thing?
    • Has the Federal Reserve Taper Already Impacted Vol
    • License to Kill (Portfolio Returns)
    • What Will Taper Do to Implied Volatility?
    • How Can Investors Benefit from Rich Volatility Ris
    • Volatility Is Where You Find It
    • Taking Stock at Mid-Year—What Can Investors Rely O
    • Volatility Pricing Indicates Market Expectations
    • A Multidimensional Volatility Environment
    • The Alternative to "There is No Alternative"
    • A Closer Look at Bond Market Performance
    • Familiar Factors Present as the VIX® Nears Record
    • Will Volatility Risk Premium Remain Attractive in
    • Lower, not Low: An Examination of Recent Implied V
    • October 2020 Market Perspective
    • September 2020 Market Perspective
    • August 2020 Market Perspective
    • July 2020 Market Perspective
    • June 2020 Market Perspective
    • May 2020 Market Perspective
    • April 2020 Market Perspective
    • March 2020 Market Perspective
    • February 2020 Market Perspective
    • January 2020 Market Perspective
    • December 2019 Market Perspective
    • November 2019 Market Perspective
    • October 2019 Market Perspective
    • Q3 2019 Market Perspective
    • August 2019 Market Perspective
    • July 2019 Market Perspective
    • June 2019 Market Perspective
    • May 2019 Market Perspective
    • April 2019 Market Perspective
  • Market Review
  • Quick Takes
  • Flagship (Index/RA) Commentary
  • Active Overwrite Commentary
  • Active PutWrite Commentary



Learn More ›

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Cincinnati, OH 45202-9834
Phone: 513-719-1100
Fax: 513-719-1199
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Boston, MA 02199

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