Traders work in the Cboe Volatility Index (VIX) options pit at the Cboe Global Markets exchange in Chicago, Illinois, US, on Tuesday, April 8, 2025.
Jim Vondruska | Bloomberg | Getty Images
It’s common knowledge that September is the worst month for stocks, with the S&P 500 averaging its lowest monthly return. Combine that with options prices now the cheapest all year, and the risk-reward of buying protection in the equity market looks compelling.
That’s the view of Citadel Securities head of equity and equity derivatives strategy Scott Rubner, who wrote to clients on Monday that the bullish setup that carried the S&P to records in August is changing.
“This is not a change in our longer-term constructive equity view. It is a change in the near-term risk/reward,” Rubner wrote in a strategy report that points out the earnings calendar, buyback outlook, seasonality and retail trading patterns as reasons for caution.
“Collectively, they change the near-term asymmetry,” Rubner said. “The upside catalysts are becoming less obvious just as the downside catalysts are becoming more numerous.”
The S&P 500 set an all-time high of 7,816.70 on an intraday basis this month, following an almost 7% gain from the end of July through the first week of August. Since then, the benchmark gauge has drifted sideways to lower as volatility measured by the Cboe Volatility index (VIX) fell to 14.1 last week — the lowest all year.
VIX in 2026
Single-stock volatility that was at record highs compared to index vol has also decompressed, according to Cboe data, citing the spread of the exchange’s VIXEQ index — which measures implied volatility among the top 50 S&P 500 names. Similarly, the spread between the Nasdaq 100 vol measured by the Invesco Trust QQQ and SPY fell from an all-time high in June to the lowest 20th percentile in a year, according to Cboe.
“Stronger than expected tech earnings (as seen last week with NVDA) have helped compress the volatility risk premium for tech stocks, as fears over the AI trade have subsided,” Cboe head of derivatives market intelligence Mandy Xu wrote in a note Monday morning.
As a result, downside protection is inexpensive, according to Citadel’s Rubner.
According to Rubner, September is not just rough from an historical perspective. It’s also been the weakest month of the year for buying activity among retail traders tracked by Citadel. Since 2019, average retail net buying on days the S&P is down has been about half the average.
Rubner also writes that corporate buybacks will slow as the blackout period for companies to buy back shares accelerates around Sep. 12.
“Investors are entering a much more macro event-heavy period while paying relatively little premium for protection,” said Rubner.
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