If you’re wondering what typically happens to equities and the VIX following two-session spasms akin to the melodramatic August 2-August 5 vol shock, the answer is that stocks are typically higher and vol lower.

That’s not surprising. Particularly the “0%” hit rate for a higher VIX on the heels of episodes when the “fear gauge” outperforms on a beta-to-SPX basis. After all, vol’s mean reverting in the absence of rolling shocks to prop it up. That tendency doesn’t everywhere and always preclude higher implieds, but it does mean that volatility, as a monolith, has to be “fed.”

“These high absolute levels of volatility must be sustained with continued large market swings or else vol extremes will collapse under the weight of their own implied expectations,” Nomura’s Charlie McElligott wrote Wednesday, reiterating a familiar talking point in familiar language.

The tables below show the forwards for the S&P and the VIX following historical two-day episodes of vol outperformance (versus spot) akin to the Friday-Monday freakout.

It’s a “pretty clean ‘stocks up, rVol / iVol down,'” McElligott said, of the medians for nine priors.

That’s why anyone with the risk-management leeway to reengage is champing at the bit. And reengage some of those folks surely did on Tuesday and again on Wednesday before stocks faded into the close after a weak 10-year sale undercut sentiment.

“Dealers will be getting back gamma from the re-emergence of vol sellers,” alongside the monetization of downside hedges in equities and the unwinding of upside VIX optionality, Charlie wrote. “Crash-y vol extreme backtests are screaming to get constructive, especially with cleaner positioning in underlying equities exposure.”

But if you’re keen to exploit this situation by, for example, selling still-rich downside vol to fund bullish bets, McElligott said you want call spreads, not “dumb” upside.

“Why not outright calls?” he wondered, on your behalf. The short answer is that vol’s still elevated, and that means outrights are still expensive. “You have to cheapen them,” Charlie remarked.

Beyond that, there are myriad reasons to believe we’re not going back to the kind of “right tail” crash-up environment where you risk underperforming if you cap your upside. McElligott enumerated four such reasons.

“The explosion higher in trailing realized vol will continue to crimp the speed by which many will be able to reallocate long,” he wrote, adding that upside could also be capped by “a still-treacherous” US political landscape, headline risk out of the Mideast and “most importantly, the real-time re-pricing of what had been ‘0 delta hard landing’ to something more like a ’20 delta hard landing’ following the US labor market downside surprise meltdown.”