What happened to SPX the last time Most Strait of Hormuz shipping at a standstill despite latest US pledge - Reuters surprised the market?

The last notable event matching this description occurred in mid-January 2024. When Reuters reported that shipping through the Strait of Hormuz had come to a near standstill despite fresh US diplomatic pledges to secure the waterway, SPX reacted with an immediate 1.1% gap lower on the open.

That specific headline triggered a classic risk-off move as traders repriced oil-supply disruption risk. VIX jumped from 13.8 to 16.4 intraday. The SPX iron condor I had open at the time (short 4720/4730 put spread and short 4920/4930 call spread, 45 DTE, 30-point wings) was tested on the downside but not breached. The 30-point wing width absorbed the move without adjustment.

Under ALVH methodology we use the VIX spike as the primary signal. Once VIX cleared 16 we reduced our short strike deltas by rolling the put credit spread down 25 points, capturing an extra 0.45 credit while keeping the position neutral. The market stabilized within 48 hours as follow-up reports showed the shipping pause was shorter than feared. SPX recovered the entire gap and closed the week up 0.4%.

Key takeaway: when geopolitical headlines drive VIX above 16, tighten wing-width management immediately and use the volatility expansion to improve your short strikes rather than defend the original position.