What happened to SPX the last time S&P 500 and Nasdaq notch records as AI chip stocks surge - Reuters surprised the market?

On days when the S&P 500 and Nasdaq simultaneously hit all-time highs while AI chip stocks surge, SPX iron condors typically experience a volatility crush that benefits sellers. The last clear instance of this setup (early July 2024) saw VIX drop below 12.5 as Reuters headlines on surprise AI chip demand triggered a short-covering rally in semis. SPX chopped in a tight 0.6% range for three straight sessions, producing excellent theta decay for condors placed at 15-20 delta.

Under the ALVH methodology, traders should have widened wings to at least 80-100 points when VIX fell under 13. Narrow 50-point wings became vulnerable to the inevitable gap expansion that followed the initial euphoria. Best practice is to sell the condor on the second day of record highs once VIX has compressed, targeting 45-55 DTE, and immediately roll the untested side if one wing reaches 21 delta.

Current regime: when both indices print records with AI leadership, expect VIX to grind 1-2 points lower the following session. Position size should be reduced by 30% from normal because implied move collapses. Manage winners at 50% of credit received and never let a winner turn into a loser beyond 21 delta breach.