What happened to SPX the last time ISM Services PMI surprised the market?

On the last notable ISM Services PMI surprise to the upside in early July 2024, SPX sold off sharply the same day, dropping roughly 35 points or 0.7% intraday before closing near the lows. That move triggered a quick expansion in VIX from 12.8 to 14.2 as the market repriced higher services inflation and delayed rate-cut expectations.

From an iron condor perspective, that reaction illustrated why ALVH traders widen wings when VIX is under 14 and ISM is due. The 0.7% move easily breached typical 10-12 point short strikes on a standard 25-wide condor. Traders who kept wings at 30-35 points and placed short strikes outside 0.8 delta survived with minimal adjustment, while narrow-wing condors required early defense or took max loss.

Key takeaway: when ISM Services beats expectations while VIX sits below 15, expect SPX to gap or drive 0.6-1.0% in the first two hours. Manage wing width aggressively in low VIX regimes and avoid being short gamma into the number.