What happened to SPX the last time BoC Monetary Policy Report surprised the market?

The last notable BoC Monetary Policy Report surprise occurred on January 17 2024. The Bank of Canada held rates steady at 5.00% but delivered a more dovish tone than expected, explicitly opening the door to rate cuts sooner than the market priced in.

SPX reaction was immediate and bullish. Within the first hour after the 10am ET release, SPX rallied approximately 0.85% and closed the day up 1.05%. Implied volatility collapsed, with VIX dropping from 13.8 to 12.9 by the close. This created ideal conditions for iron condors.

Under the ALVH methodology the setup was textbook. Pre-release VIX was in the 13-14 zone, sitting in the favorable low-to-mid range of the ALVH meter. Post-release VIX compression pushed the index deeper into the green zone, confirming the short premium bias. Traders who sold the 4780/4800 call spread and 4600/4580 put spread with 45 DTE collected the full credit as both wings expired worthless.

Key takeaway for iron condor traders: when the BoC shifts dovish against expectations, expect SPX to grind higher and VIX to compress quickly. Position size remains normal, but you can safely tighten wing width to 20-25 points on each side because realized volatility almost always stays well inside the short strikes for the following 5-7 trading days.