Goldman Warns: Brace For A Volatile October

If you’re long vol. and by extension aren’t benefiting from the “stable” carry that accrues to Target managers whose E*Trade accounts are growing exponentially on tiny laptop screens, then you can’t blame Donald Trump for your trials and tribulations.

Because by God this President is trying with every orange fiber of his being to engineer some volatility. I mean short of actually nuking a city, there’s not much else Trump can do in terms of creating conditions that are conducive to turmoil.

So far, Trump’s bombast has proven no match for Yellen’s jawboning, Draghi’s bond buying, and Kuroda’s magic money machine, but if the last 72 hours are any indication, that may be about to change.

Markets have had to cope with all manner of geopolitical insanity throughout history, but I’m not sure they’ve ever been tested in an environment characterized by a nuclear standoff between a “mentally deranged dotard” and a 30-something dictator who is “obviously a madman.” 

But if you’re long vol. and you still think you need a little extra help, it’s worth noting that October seasonality is on your side. As Goldman writes in a new note, “volatility tends to be 25% higher in October.” To wit:

On average since 1928, October SPX realized volatility has been 19 vol vs 15 vol for other months. High October volatility is visible in each major index and sector over the past 30 years; we analyze NDX, R1000, R2000, and 60 sub-sectors. Technology and Healthcare are among the sectors which see the biggest increase in volatility, likely due to the large number of important single stock events.

In recent decades, October volatility has been even higher and even more of a standout driven by volatility spikes in 1997, 2002, and 2008.

So you know, next month might not be the best time to be selling options.

Goldman goes on to write that in their estimation, “high October volatility is more than just a coincidence.”

That assessment could be borne out “bigly” in 2017…