Global index volatility: J.P. Morgan’s chartbook maps unusually high Korean volatility against low Hong Kong and China index volatility

Overview

This is a global derivatives-market dashboard rather than a directional equity recommendation. It compares current volatility, skew, term structure, variance-swap, forward-volatility and correlation measures with their five-year histories to identify relative extremes across major equity indices and selected cross-asset markets.

Core views

J.P. Morgan organizes the chartbook around rankings of current values and one-week changes versus five-year history. The framework covers implied volatility, 25-delta skew, variance swaps, forward volatility, annualized rolldown, term structure, variance convexity, cross-index spreads, implied correlation and stock-versus-index volatility dispersion. The report uses option mid-prices for variance and volatility swaps and model-simulated forward volatility and forward variance measures. The most pronounced high-volatility reading is KOSPI2. Its 1M at-the-money-forward implied volatility was 41.8 after a 1.1-point weekly increase, while 1Y implied volatility was 39.7 at the 90.7th five-year percentile. KOSPI2 also ranked among the richest markets in variance swaps: 6M and 1Y variance swaps were 45.1 and 43.9, respectively, at 88.9th and 88.8th percentiles. Its 1Y 1Y forward volatility was 34.8 at the 94.2nd percentile, and its 1M variance convexity was 3.0 at the 90.0th percentile. In contrast, its long-dated 25-delta skew was unusually low: the 1Y measure was -1.5, at the 0.1st five-year percentile, after falling 1.3 points over the week. Hong Kong and China-related index volatility screens comparatively inexpensive. HSCEI 1M implied volatility was 18.3 at the 5.6th percentile and its 6M reading was 20.8 at the 6.3rd percentile. HSI 1M and 3M implied volatilities were 16.8 and 18.3, at the 6.4th and 7.0th percentiles. Their variance swaps were likewise among the lowest-ranked: HSCEI 6M and 3M variance swaps were 23.8 and 22.8 at the 1.3rd and 2.0th percentiles, while HSI 6M and 3M swaps were 21.8 and 20.9 at the 2.0th and 3.8th percentiles. At the same time, HSI and HSCEI featured rich forward-volatility rolldown and long-dated term-structure readings, including HSI 1Y 1Y annualized rolldown of 1.4 at the 99.0th percentile and HSCEI 6M 1Y rolldown of 2.1 at the 98.9th percentile. The weekly moves were mixed across developed equity markets. NDX 1M implied volatility increased 1.9 points to 17.6, and its 1M variance swap increased 1.6 points to 20.8. RTY 1M implied volatility rose 1.0 point to 16.9 and its 1M variance swap rose 0.9 point to 19.6. By contrast, 1M implied volatility declined for SMI by 1.0 point to 12.0, UKX by 0.8 point to 10.9, DAX by 1.3 points to 14.1 and SX5E by 1.2 points to 13.9. NKY remained elevated on longer horizons, with 1Y implied volatility of 23.8 at the 85.4th percentile and 1Y variance swap of 28.2 at the 78.3rd percentile. The cross-asset section extends the monitoring framework beyond equities. WTI oil implied volatility was 55.8, at the 86.3rd five-year percentile, after a 7.6-point weekly increase, while gold implied volatility was 19.0 at the 78.8th percentile after declining 1.8 points. The report also tracks FX, rates and credit volatility. It rebases cross-asset volatility levels to 100 at the starting point and compares average one-month implied volatility across global equities, FX, interest rates and commodities.

Analysis framework

The report compares current option-market measures and weekly changes with five-year percentile rankings across global indices. It then examines relative-value signals through maturities, skew, volatility and variance spreads, forward measures, implied-versus-realized volatility and correlation, and cross-asset dashboards.

Methodology notes

• Other

  Five-year percentile ranking of current levels and weekly changes

  The chartbook ranks each metric against its own five-year history to identify unusually high, low, rising or falling volatility conditions.

• Other

  Implied versus realized volatility comparison

  The report compares option-implied volatility with subsequently observed or recent realized volatility to show the option-market premium or discount.

• Other

  Forward volatility and annualized rolldown

  Forward volatility measures future-starting option volatility, while rolldown shows how volatility exposure changes as time passes along the term structure.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• KOSPI2

  High-ranked global equity-index volatility market

  Strengths

  1M and 1Y implied volatility, variance swaps and forward volatility rank high versus five-year history.

  Weaknesses

  Long-dated 25-delta skew ranks at exceptionally low percentiles.

  Comparison

  Volatility levels materially exceed those of major US, European and Hong Kong indices in the dashboard.

• HSI and HSCEI

  Low-ranked Hong Kong and China-related equity-index volatility markets

  Strengths

  Forward-volatility rolldown and selected long-dated term-structure measures rank high.

  Weaknesses

  Short- and medium-dated implied volatility and variance swaps rank near the bottom of their five-year ranges.

  Comparison

  Both indices screen materially cheaper than KOSPI2 across multiple spot-volatility and variance-swap measures.

Key data

• KOSPI2 1M ATMF implied volatility41.8Up 1.1 points in one week; 88.8th five-year percentile.
• KOSPI2 1Y ATMF implied volatility39.790.7th five-year percentile.
• HSCEI 1M ATMF implied volatility18.3Up 0.3 points in one week; 5.6th five-year percentile.
• HSI 1M ATMF implied volatility16.8Unchanged over the week; 6.4th five-year percentile.
• NDX 1M ATMF implied volatility17.6Up 1.9 points in one week.
• WTI oil 1M implied volatility55.8Up 7.6 points in one week; 86.3rd five-year percentile.

Impact & implications

The report’s relative-value dashboard identifies a sharp contrast between elevated Korean option-implied risk pricing and comparatively low Hong Kong and HSCEI volatility pricing. It also shows that weekly volatility increases were concentrated in selected markets such as NDX, RTY and KOSPI2, while several European equity indices saw lower short-dated implied volatility.

Risks

• Not all option strategies are suitable for investors and certain strategies can create significant losses.
• Selling uncovered calls can expose investors to theoretically unlimited upside losses.
• Selling puts can expose investors to declines in the underlying asset below the strike price, potentially to zero.
• Option buyers may lose 100% of the premium paid if the option expires out of the money.
• Covered-call, collar and spread strategies can cap upside participation while retaining or reintroducing downside exposure.