What happened to SPX the last time GDP Growth Rate YoY Prel surprised the market?

The last significant GDP Growth Rate YoY Prel surprise occurred on July 30 2024 when the reading came in at 2.8% versus the expected 2.0%. SPX reacted with an immediate gap higher of about 0.7% in the first 30 minutes after the release.

Within the first hour SPX pushed up to +1.1% before sellers stepped in. By the end of the day the index closed up 0.85%. The move was relatively contained because VIX was already low at 16.2 and the surprise aligned with the soft-landing narrative already priced in.

From an iron condor perspective, that particular surprise produced a 1.4% daily range in SPX. This is why under the ALVH methodology we keep short strikes at least 1.8-2.0 standard deviations away when VIX is below 18 and an important data point like GDP is scheduled. The 15-20 delta wings held comfortably that day, but any tighter wing width would have been tested intraday.

When GDP surprises to the upside in a low-VIX environment the initial reaction tends to be a quick 0.8-1.2% SPX pop followed by mean reversion. Plan your wing widths and profit targets accordingly.