08 Oct 2025
Eurex
Focus on VSTOXX® Derivatives | October 2025 recap
European markets finished positive in October. The STOXX® Europe 600 led with a 2.46% rise, followed closely by the EURO STOXX 50® with a 2.39% increase. The DAX Index in Germany was the laggard for the month with only a 0.325% return.
Despite positive equity markets in the month, implied volatility was higher across the board, led by the DAX’s implied volatility, which increased by nearly two vol points. Gains were more muted in SX5E and SXXP as levels rose 0.5 and 0.75 vol points, respectively.
Skew was basically flat during the month, decreasing from 5.72 to 5.49 for 95%-105% skew. Implied correlation rose slightly month over month after hitting the year’s lows in the first two weeks of the month.
Equity Index Volatility
European equity indices rallied over the month, but investors and traders expressed some concern over the ability for these gains to continue, as seen in the implied volatility markets. The DAX’s implied volatility rose from 12.01 to 14.19 even though realized volatility was flat at 12.2. Gains were more muted in SX5E and SXXP as levels rose from 12.42 to 12.97 and 9.78 to 10.52, respectively. However, in each case, the gap between implied and realized volatility also widened, indicating a sense of increasing risk premium.
VSTOXX Index Performance
This sense of growing risk premium was also evident in the V2X market. V2X futures rose from 17.75 to 19.0, but more importantly, the spread versus SX5E realized volatility widened from 6.5 points to 8 points over this same period. The spread between V2X and VIX appeared relatively constant on a month-to-month closing basis. However, in the middle of the month, the VIX widened to almost 4 points near October expiration, as US-China trade concerns rattled the US markets but not the European markets. These fears calmed by the month-end, and the spread was back to flat.
STOXX® Europe 600 Index Skew
Skew, as measured by the difference between 95% puts and 105% calls, stayed flat month-over-month near the long-run average of about 5.5 vol points. Early in the month, the spread widened to over 8 vol points by October 10, when the SX5E Index dropped 2% in a single day due to US-China trade concerns, particularly regarding China's rare earth retaliation. By the end of the month, as markets stabilized and moved higher, skew stabilized and returned to long-term averages.
Correlation
Implied correlation fell early in the month in anticipation of company earnings and more idiosyncratic movement. As earnings were reported, implied correlation rose but remains muted on a year-to-date basis.
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