VIX Futures Point to Market Turbulence Post-Fed Rate Cut
Futures linked to the VIX index indicate markets could face increased volatility after the Federal Reserve’s anticipated rate cut on Sept. 17. October VIX contracts are trading at a steep premium to September’s, signaling potential post-Fed swings.
The VIX, often called Wall Street’s fear gauge, measures expected 30-day volatility in the S&P 500. The spread between October and September futures has widened to 2.2%, a historically significant level, while the September front-month contract remains only slightly above the cash index.
“September is extremely low compared to October futures, suggesting risk may be underpriced ahead of the Fed meeting,” said Greg Magadini, director of derivatives at Amberdata.
The Fed is expected to cut rates by at least 25 basis points, with some traders anticipating a 50-point reduction. While September futures reflect calm ahead of the decision, October contracts suggest turbulence could follow once the rate cut is priced in.
Historically, VIX spikes coincide with falling equity prices. Bitcoin (BTC), which often tracks Wall Street sentiment, could also see heightened volatility. Bitcoin’s 30-day implied volatility indices have recently shown record correlation with the VIX, underscoring crypto’s growing sensitivity to broader market risk.
