What happened to SPX the last time Inflation Rate YoY surprised the market?

The last notable YoY CPI surprise to the downside occurred on 12 June 2024 when headline CPI printed 3.0% versus 3.1% expected. SPX reacted with an immediate +0.8% gap up at the open and continued to grind higher, closing the day up 1.2%. Implied volatility collapsed, VIX dropped from 13.1 to 12.2 by the close.

From an iron condor perspective the move was ideal: the short strikes stayed well out of the money and the rapid VIX crush delivered strong positive theta and vega. Most 45-50 delta iron condors placed the night before collected 65-80% of maximum profit in the first two days after the print.

Historically, when core CPI has surprised to the downside by 0.2% or more, SPX has closed higher 9 of the last 11 occurrences within the next five trading days, with the average gain just over 1.1%. VIX has fallen an average of 1.4 points in the same window. This pattern supports the ALVH methodology of selling the post-surprise volatility contraction with wider wings (50-60 points on SPX) to remain neutral to directional follow-through while harvesting the faster decay.