The recent inauguration of President Trump and his subsequent executive orders have led to a decrease in market volatility, as indicated by the VIX's decline to around 15. This reduction in implied volatility suggests that the stock market rally might be losing steam, despite equities experiencing a notable rise. Traders are beginning to hedge their gains or adopt more bearish positions, such as call selling and put buying, indicating a potential pause in the rally. The absence of significant catalysts, like the upcoming FOMC meeting and PCE inflation data, further limits the upside potential, while elevated realized volatility acts as a floor for implied volatility, reducing supportive vanna flows.
The ProShares Trust Ultra VIX Short Term Futures ETF (UVXY) has seen a modest increase, rising 1.38% to $18.40 as of 14:00 on Wednesday, January 22.