By Steven M. Sears

The curse of modernity is to be surrounded by so much information and so little knowledge.

The difficulty pushes many investors to believe they know more than they do. This is expressed as overconfidence and through formulating theories that solidify personal biases. The paradox is always evident around major market events that can dramatically move stock prices and options volatility. The next six weeks could offer a parade of such events -- political, economic, and corporate.

If President Donald Trump negotiates a cease-fire between Russia and Ukraine, commodity prices, especially oil, and global equity prices, might move sharply.

A similar setup defines the Federal Reserve's summer gathering at Jackson Hole, Wyo., this week. Anything Chairman Jerome Powell says during his Friday speech that signals lower interest rates would presumably send stocks higher and options volatility lower.

Many investors love speculating on events, even though it is widely known that they are hard to accurately predict. There is an easier way to try to make money. Just look at your calendar.

For instance, when implied volatility is low, as it is now for the S&P 500 index, it ultimately returns to higher, long-term averages. The move is usually triggered by many factors, including expectations of weak stock market performance in September and October.

Volatility's broadest measure, the Cboe Volatility Index, or VIX, is around 15.69, below its long-term average of 19. The S&P 500's implied volatility is even lower.

When options volatility is low, many sophisticated investors buy put options to profit from volatility's inevitable return to a normal higher level. Put options increase in value when stock prices decline. Volatility can increase if stock prices are unchanged. This occurs in anticipation of potential stock moves, or in reaction to, say, investors buying puts even as stocks are advancing.

Already, this activity is characterizing the Sept. 5 and Sept. 12 expirations of options on the S&P 500 SPDR Trust $(SPY)$. The expiries also cover Nvidia's Aug. 27 earnings report, an event that could have profound market impact, and several economic reports that are important to analyzing interest-rate levels.

In recent trading, an investor bought 37,000 September $635 puts and sold 37,000 September $605 puts. The massive put spread -- that is, buying a put and selling another with a lower strike price but same expiration -- anticipates the benchmark index may fall to $605 at expiration from its current level of about $640.

Investors who want exposure to a wider variety of potentially market-moving factors should consider the Sept. 30 expiration. September is often the year's most volatile month because investors start fretting about October's reputation for sharp stock declines.

Susquehanna's Chris Jacobson suggested to clients that they consider Sept. 30 expirations to capture volatility's seasonality and the next Federal Reserve meeting, which concludes on Sep 17.

With SPY at $640, investors could buy the September $635 put and sell the September $610 put, both of which expire on Sept. 30, for a cost of $4.78. If SPY is at $610 or lower at expiration, the spread is worth a maximum profit of $20.22. During the past 52 weeks, SPY has ranged from $481.80 to $646.19.

Time is the key risk to trading volatility's mean reversion. The probabilities are good this time of year, but not certain, even if the odds are better than guessing event outcomes.

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(END) Dow Jones Newswires

August 22, 2025 21:31 ET (01:31 GMT)

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