Back Derivatives Strategy

With Markets Exhibiting Signs of Euphoria, June VIX Call Spread Hedges Make a Lot of Sense

Published on May 10, 2026

Jeff Jacobson

The equity markets continued their historic rally last week, once again being led higher by the tech/AI/semiconductor trade. The nasdaq (QQQ) was up 5.5% for the week and is now up 28% since the lows hit on March 30^th. The semiconductor names were the real stars as the SMH gained another 11%+ for the week and is now up 57.5% from that same March 30^th low. While the momentum to the upside has been undeniable, there are signs that should make even the bullish of investors a bit concerned. Those semi names (SOXX Index) registered its highest RSI “overbought” reading since March 2000 (we all know what happened after that). In addition, $2.6 trillion of notional value in S&P 500 (SPX) call options traded on Friday, which was the highest amount ever traded (with 60% of all options trading being calls). Finally, net positioning in VIX futures by institutional asset managers has once again flipped to “negative”. Recall, it was this “complacency” in VIX positioning back in January that made me believe we could see both a decline in the indices as well as a push higher in volatility (here).

SMH up an incredible 57.5% in less than six weeks. The RSI (Relative Strength Index) hit “overbought” levels last seen in March 2000

A screen shot of a graph

AI-generated content may be incorrect.

Net VIX future positioning has once again flipped to negative. We saw large buying/covering thru March as markets sold off
A graph on a screen

AI-generated content may be incorrect.

While it is impossible to stand in front of a momentum train like this, you can take measures to hedge against a possible reversal. Any market that can rally this much, this soon, is certainly capable of reversing lower out of nowhere (much like the upside “pivot” we saw at the end of March). While index hedges could absolutely be considered given the rally, and accompanying decline in volatility, I still believe VIX tail call spreads remain the most attractive way to hedge a long risk-asset portfolio at this time.

Back in mid-April I had suggested buying May VIX call spreads to hedge against a possible pullback in the markets (with an expected accompanying spike in volatility). While neither of those materialized, the May VIX call spread is STILL worth more than 50% of the initial cost, while any equivalent SPY/QQQ put hedge has likely lost more than 95% of its value. This is both a function of May VIX futures only declining by ~ 5% over that time, as well as the continued rally in the indexes moving the delta considerably lower on any puts that would have been purchased at that time.

For anyone who did buy May VIX call spreads as a hedge, now is the time they must be rolled to June. Not only will the bulk of the decay (theta) be realized over the next week or so, but we have also seen a large bias for the front-month futures to “collapse” into expiration. We clearly saw that play out in April, when we saw the April futures decline from over 24 to below 18 in a matter of days. Therefore, I would strongly suggest to anyone who is still in a May VIX call or call spread to roll to a comparable June structure as soon as possible since the May futures expire on May 19th.

The April VIX futures did a nosedive into the April 15^th expiration

A graph on a black background

AI-generated content may be incorrect.

As far as a June VIX hedge, I favor adding low-cost/high-payout call spreads for mamy of the same reasons why I liked the May hedge. It seems that we are getting near a “floor” to vol again (as evidenced by the fact that May VIX futures are barely lower even as the markets continue to race higher). In fact, we saw spot vol HIGHER on Friday, even as QQQ gained over 2% and SPY was up nearly 1%. Have we reached the point where dealers are more concerned about making upside calls too cheap again? This wouldn’t be out of the question, especially given the notional amount of S&P calls that traded on Friday as well as the decided call vs put ratio. In addition, VIX call skew has continued to move higher off the March lows, which certainly favors owning a “wide” upside call spread.

June VIX futures have moved back down to support and continue to “hold” that level even as markets make new highs

VIX June 10d/40d call skew is up from the March lows and remains attractive

If either rolling an existing May VIX position, or looking to establish a new June VIX hedge, here is a trade I would consider owning now:

Buy VIX June 17^th 25 calls
Sell VIX June 17^th 45 calls
Costs ~ $1.05 (June VIX futures ref of 20.60)

Trade Details:

Buying the 20-point wide June upside VIX call spread as a “cheap” macro tail hedge
VIX hedges continue to perform much better than index hedges given “floor” to vol
Signs of complacency include; very “overbought” levels on RSI, huge amount of upside call buying/chasing and VIX future positioning once again turning negative
Spread offers an 18x to 1 max payoff and has more than five weeks of duration before the June 17^th expiration
Selling the 45 call covers nearly 30% of the cost of buying the 25 call (speaks to the attractive call skew I referenced)
Attractive “overlay” trade to an existing long/bullish portfolio after a “historic” rally off the March lows

Please reach out to me or the 22V sales team for updated pricing and execution capabilities

DISCLOSURES AND DISCLAIMERS

Analyst Certification

The analyst, 22V Research Group, primarily responsible for the preparation of this research report attests to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers; and (2) that no part of the research analyst’s compensation was, is, or will be directly related to the specific recommendations or views in this research report.

Analyst Certifications and Independence of Research.

Each of the 22V Research analysts whose names appear on the front page of this report hereby certify that all the views expressed in this Report accurately reflect our personal views about any and all of the subject securities or issuers and that no part of our compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views of in this Report.

22V Research (the “Company”) is an independent research provider. The Company is not a member of the FINRA or the SIPC and is not a registered broker dealer or investment adviser. 22V Research has no other regulated or unregulated business activities which conflict with its provision of independent research.

22V Research, LLC is a professional services and independent publication organization. 22V Research, LLC is not a securities broker-dealer, not a member of the Financial Industry Regulatory Authority (FINRA), not a registered investment advisor (RIA) and not a member of SIPC.

Securities transactions, when offered, are offered by 22V Securities, LLC through LPS Capital, LLC. Certain employees of 22V Securities, LLC are dually registered as securities representatives of LPS Capital, LLC or Analyst Hub Securities, LLC. 22V Securities, LPS Capital and Analyst Hub Securities are members FINRA, SIPC.

https://brokercheck.finra.org/

Current Ratings Definition.

SECTOR OUTPERFORM: An “outperform” rating anticipates the company will outperform the S&P Regional Banking Index (peer group).

SECTOR PERFORM: A “market perform” rating anticipates the company will perform in line with the S&P Regional Banking Index (peer group).

SECTOR UNDERPERFORM: An “underperform” rating anticipates the company will underperform the S&P Regional Banking Index (peer group).

Limitation Of Research And Information.

This Report has been prepared for distribution to only qualified institutional or professional clients of 22V Research Group. The contents of this Report represent the views, opinions, and analyses of its authors. The information contained herein does not constitute financial, legal, tax or any other advice. All third-party data presented herein were obtained from publicly available sources which are believed to be reliable; however, the Company makes no warranty, express or implied, concerning the accuracy or completeness of such information. In no event shall the Company be responsible or liable for the correctness of, or update to, any such material or for any damage or lost opportunities resulting from use of this data. Nothing contained in this Report or any distribution by the Company should be construed as any offer to sell, or any solicitation of an offer to buy, any security or investment. Any research or other material received should not be construed as individualized investment advice. Investment decisions should be made as part of an overall portfolio strategy and you should consult with a professional financial advisor, legal and tax advisor prior to making any investment decision. 22V Research Group shall not be liable for any direct or indirect, incidental or consequential loss or damage (including loss of profits, revenue or goodwill) arising from any investment decisions based on information or research obtained from 22V Research Group.

Reproduction And Distribution Strictly Prohibited.

No user of this Report may reproduce, modify, copy, distribute, sell, resell, transmit, transfer, license, assign or publish the Report itself or any information contained therein. Notwithstanding the foregoing, clients with access to working models are permitted to alter or modify the information contained therein, provided that it is solely for such client’s own use. This Report is not intended to be available or distributed for any purpose that would be deemed unlawful or otherwise prohibited by any local, state, national or international laws or regulations or would otherwise subject the Company to registration or regulation of any kind within such jurisdiction.

Copyrights, Trademarks, Intellectual Property.

22V Research Group, and any logos or marks included in this Report are proprietary materials. The use of such terms and logos and marks without the express written consent of 22V Research Group is strictly prohibited. The copyright in the pages or in the screens of the Report, and in the information and material therein, is proprietary material owned by 22V Research Group unless otherwise indicated. The unauthorized use of any material on this Report may violate numerous statutes, regulations and laws, including, but not limited to, copyright, trademark, trade secret or patent laws.