Data from November’s Job Openings and Labor Turnover Survey (JOLTS) came in far above economist forecasts, reaching 8.098 million job openings. 22V Research head of derivative strategy Jeff Jacobson joins Catalysts to analyze how recent economic data could trigger increased market (^DJI, ^IXIC, ^GSPC) volatility. Jacobson highlights that, while market volatility has increased over the past 11 trading days, the Volatility Index (^VIX) has retreated from its December peaks. "So you’re getting a scenario set up here where implied vol[atility], or the cost of buying protection, has come in, yet at the same time, we’ve seen realized volatility move up," he explains. With significant economic data releases still ahead, Jacobson notes, "We have plenty of opportunity … where we could see heightened volatility. And certainly, if we get the moves in the bond market that would go against higher yields, which would go against favoring stocks here, there could be a set-up here where we see a decent pullback." However, he emphasizes that the bond market (^TNX, ^TYX, ^FVX) remains the key catalyst for market volatility. On investment strategy, Jacobson recommends SPDR S&P 500 ETF (SPY) puts. He explains, "I like buying puts outright here, and if we do get a move lower, not only will you be able to monetize those puts, but it’ll obviously act as a nice portfolio hedge."
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