S&P 500 single-stock volatility hits highest since March 2025 amid index calm
The average 3-month implied volatility of S&P 500 single stocks has surged to ~40, the highest since the March-April 2025 sell-off, while the index's implied volatility remains near 15, signaling growing divergence and hidden stress beneath the surface.
The gap between S&P 500 index volatility and individual stock volatility is rapidly widening. The average three-month implied volatility of a single S&P 500 stock has risen to about 40, marking the highest level since the March-April 2025 market sell-off. This metric has surged by 10 points since the start of 2026 and is also at the second-highest level since the 2020 pandemic.
Such elevated single-stock volatility signals extreme stress across individual names trading within the broader index. Meanwhile, the S&P 500's own implied volatility remains near 15, well below levels seen during previous periods of market turmoil. This divergence is attributed to mega-cap stocks dominating the index weighting, which suppresses overall index volatility and masks underlying weakness.
The data indicates that the market is becoming increasingly volatile under the surface, even as headline volatility appears subdued.
Source: The Kobeissi Letter