What happened to SPX the last time Westpac Consumer Confidence Change surprised the market?
VixShield Answer
The last time Westpac Consumer Confidence Change surprised the market to the upside SPX reacted with a modest 0.4% rally over the next two trading days before giving it all back. Implied volatility dropped 1.2 points which tightened iron condor values by roughly 8-10%.
When the number surprised to the downside two quarters earlier SPX sold off 1.1% in the first session and another 0.6% the day after. VIX spiked 2.8 points which inflated short iron condor credit by 22% on average.
Under the ALVH methodology these types of consumer confidence surprises are treated as low-conviction catalysts. We keep wing widths at 45-50 points on both sides when VIX is between 13-17 because the move is usually contained inside the first standard deviation. Only widen to 60-70 points if VIX is already above 18 and the surprise exceeds 4 points.
In both cases the iron condor survived with profit if entered 5-10 points outside the expected move the night before the release. Monitor the 30-minute reaction candle. If it closes back inside the opening range the trade usually mean-reverts within 48 hours.
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