Warsh Pick Jolts Vol: Jan 31, 2026

Market note: Jan 31, 2026 fell on a Saturday. Volatility products did not trade that day, so the moves below reflect the prior session, Friday’s Jan 30 close.

Table of Contents

Outline: Why volatility products moved

Fed leadership shock lifted the market’s “policy uncertainty” premium after President Trump nominated Kevin Warsh as Fed chair, pushing traders to pay up for near term protection.
Equities slipped into the close, led by a tech-heavy fade, keeping demand for index hedges firm.
Vol-of-vol outpaced spot vol: VVIX rose more than VIX, a sign traders expected bigger swings ahead and bid up VIX options.
Term structure stayed in contango, suggesting nerves, not panic. That matters because contango typically limits upside in long volatility ETPs that roll VIX futures.
Rates and crude were not offering comfort: Treasury yields held near recent highs and oil eased, reinforcing the idea that the next volatility catalyst is macro policy, not growth momentum.

Concise summary

Volatility ticked higher at week’s end as Trump’s Warsh nomination reframed the most important question in markets from “when is the next cut?” to “who is steering the wheel?” The S&P 500 and Nasdaq finished lower, VIX rose to 17.44, and VVIX climbed to 108.18. The VIX futures curve remained upward sloping, a reminder that hedging demand increased, but the market was not pricing immediate crisis conditions.

Looking Back: What moved volatility

Policy uncertainty hit the tape, and hedges got pricier.
President Trump’s nomination of Kevin Warsh as Federal Reserve chair injected fresh uncertainty around the future path of rates and the perceived independence of the Fed. Into that backdrop, implied volatility rose as investors refreshed protection and dealers repriced risk around the front end of the curve.
VIX rose, but the bigger tell was VVIX.
The Cboe Volatility Index (VIX) closed at 17.44, up 0.56 points from Jan 29’s 16.88. More notably, VVIX (often read as a gauge of demand for VIX options) closed at 108.18, up 6.31%. When VVIX leads, it often reflects traders bracing for sharper, less predictable swings than spot VIX alone suggests.
Stocks leaked lower, keeping protection in play.
The S&P 500 fell 0.43% to 6,939.03; the Nasdaq Composite dropped 0.94% to 23,461.82; the Dow fell about 0.4% to 48,892.47. A red close rarely “causes” VIX by itself, but it keeps the bid under index puts, especially when the headline risk is Washington-adjacent and hard to handicap.
Volatility ETPs rose, though contango capped the pop.
Short-term VIX futures products posted modest gains rather than fireworks. UVXY ended at $37.23 (+1.55%) and VIXY at $26.60 (+1.26%). With the VIX futures curve in contango, rolling exposure can dilute gains versus spot VIX, especially on a one-day jolt that stops short of a true risk-off stampede.
Term structure: anxious, not alarmed.
VIX futures remained in contango with the front month below the second month (for example, 16.15 vs 18.51 in a late-day snapshot). That upward slope tends to be a market’s way of saying “today is uncomfortable, but we are not pricing a near-term shockwave.”
Rates steady, oil softer: cross-asset backdrop stayed tense.
Treasury yields were roughly unchanged on the day, with Treasury’s curve showing about 3.52% on the 2-year and about 4.26% on the 10-year (Trading Economics showed the 10-year near 4.24%). In commodities, WTI settled around $65.21, down modestly. The message from both was consistent: policy and geopolitics were doing more to set the mood than growth optimism.

Sources (Looking Back)

Looking Forward: What could move volatility next

Fed calendar remains the main stage.
The next scheduled FOMC meeting is March 17–18, 2026. Even before then, the market tends to “pre-trade” the meeting through speeches, leaks, and positioning. With a chair nomination in play, every marginal signal on reaction function and independence can show up first in implied volatility.
Warsh nomination process and Fed credibility headlines.
Confirmation chatter is not a scheduled macro release, which is exactly why it can matter for volatility. Surprise is the raw material of implied vol, and Washington has been supplying it.
Earnings season aftershocks, especially big-tech capex.
Investors are still sorting durable earnings strength from expensive promises. Any fresh guidance on AI spending, margins, or demand can shift index concentration risk, and that tends to flow straight into index options pricing.
Geopolitics and energy: a volatility accelerant.
Oil has been sensitive to Middle East headlines and U.S.-Iran tensions. Another flare-up can pressure inflation expectations, complicate the rates outlook, and push volatility higher through both stocks and bonds.

Tony

I have been trading options since 2010 and have been testing and experimenting with various trading styles. Fundamental Analysis based, Technical Analysis based, Trend Following, Day Trading, Swing Trading, etc.

My primary option trading strategies incorporate volatility and I am constantly experimenting with various trading strategies to improve my PNL.

I hold two Master’s degrees (MSc and MBA) with career experience as a cancer research scientist and a digital marketer.