It’s virtually never been more reliably profitable to sell vol.

I’ve been over this and over it since April, but it really is becoming an anomalous state of affairs.

The macro factors behind subdued vol included the perception that the emergency response to March’s mini-banking sector crisis was tantamount to a “policy put,” the peaceful resolution of the debt ceiling standoff in D.C., the benign dynamics behind Treasury’s cash rebuild (i.e., RRP decline mitigating reserve drain) and evidence that so-called “immaculate disinflation” is possible after all (at least in the US context).

There are any number of technical factors you could cite, but there’s also a simple, self-fulfilling Pavlovian response function at work: The more reliably profitable vol-selling appears, the more incentive market participants have to engage, and that engagement perpetuates the dynamic.

“Despite this past Friday’s predictable Op-Ex wobble, selling Vol / Gamma / Straddles for income has been an absolute profitability machine of late,” Nomura’s Charlie McElligott remarked on Monday.

The figures shown above were a great idea: What you’re looking at are 14- and 50-day relative strength calculations applied to a gamma-selling strategy on the S&P ETF. As you can see, we’re in the 97%ile on the former.

McElligott called that “sell the prem, live the dream.”

So, notwithstanding seasonality and some scope for fireworks, spot may have a difficult time moving around. “This persistent willingness from vol sellers to smoke index, even post- the September Op-Ex gamma unclench, see[s] dealers stuffed in ‘long gamma vs spot’ territory,” McElligott went on.

In order to get so-called “accelerant” flows (i.e., a selling begets more selling dynamic), spot would need to careen down through 4,400.

“Completely broken record at this point, but there is just barely any sensitivity in the VIX complex to SPX on pullbacks,” Charlie added, noting that the VIX’s three-month rolling beta to the S&P sits in just the 19%ile.