Cross-Examination of a Number: The Witness Will State Its Level for the Record

Transcript excerpt. Monday, October 12, 2026. The witness is the Cboe Volatility Index, sworn in on a stack of option chains.

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Q. State your name and your level.

A. VIX. 15.39.

Q. Up or down?

A. Up. Fifty-five hundredths of a point, 3.7 percent.

Q. From where?

A. A Friday close just under 15.

Q. On Saturday a missile hit King Khalid International Airport in Riyadh. The Saudi aviation authority counts at least twelve dead and 309 wounded. Is that correct?

A. I wasn't open Saturday.

Q. Futures were open Sunday evening. On Sunday the Houthis hit the same airport again, a fire started in Terminal 4, and the field stayed shut. It was the third attack on that airport this week. Did you see it?

A. I saw it. I added the fifty-five hundredths.

Q. Let the record show that the market's fear gauge priced a Gulf war reaching the capital of Saudi Arabia at roughly the cost of a late lunch.

A. I measure thirty days of S&P 500 option prices. I don't measure Riyadh.

Q. Then who does?

A. Brent, in theory. It's at about $103 this morning, down from Friday, with WTI near $91.

Q. Down. After Riyadh.

A. After the Russian diesel announcement. ICE gasoil fell 3 percent to $1,436 a tonne.

Q. Walk the court through that announcement.

A. Trump said Russia would deliver more than 300,000 tonnes of diesel immediately, 500,000 in November and a million after that. On Sunday he also said Russia and Ukraine agreed to stop hitting each other's energy infrastructure. Zelenskyy said he was still waiting for details. Moscow said nothing.

Q. How much diesel is 300,000 tonnes?

A. About 2.25 million barrels. The world burns roughly 29 million barrels a day. So about two hours.

Q. And the whole package?

A. Eleven hours, give or take.

Q. Eleven hours of supply, undelivered, unconfirmed by one of the two parties to the ceasefire, outweighed an attack on the airport of the country whose East-West pipeline is one of the few ways around a closed Strait of Hormuz.

A. Objection. I don't set oil prices.

THE COURT: Overruled. You sit on the same trading desks as the people who do.

Q. Let's talk about that pipeline. Where does it end?

A. On the Red Sea coast.

Q. And who sits across the water, with a truce that came apart in July and a record of hitting Saudi airports, oil facilities and tankers?

A. The Houthis.

Q. Thank you. Mr. Trump was asked Saturday whether the U.S. would join Saudi strikes on them. His answer, as reported, was "We may." Last month, according to CNN, he turned down two requests from the Crown Prince for exactly that. Is a man who changed his mind inside four weeks a stable input to an option price?

A. Options are priced on the assumption that someone will change their mind. That's the product.

Q. I'll rephrase. You are at 15.4. In the last fortnight the S&P 500 hit a record, Nasdaq fell 1.3 percent on a Thursday over OpenAI's revenue, and the 10-year touched 5.365 percent, the highest since 2002. How do you sleep?

A. The index is up about 1.2 percent on the week. The equal-weight version did better. Utilities, staples and energy led. When the money rotates, I don't flinch. I read it as digestion.

Q. Digestion. And the Russell 2000?

A. Down between half a point and a full point.

Q. The part of the market that refinances at the prices set by the bond market.

A. Yes.

Q. Which is closed today.

A. Yes.

Q. For Columbus Day.

A. Yes.

Q. So on the day the Treasury market is dark, Tokyo is on holiday, Riyadh's airport is a crime scene and gasoil is trading on a press conference, your professional opinion is that the next thirty days of equity volatility will be gentle.

A. My professional opinion is a number. The number is 15.39.

Q. What is the number's track record on the week the CPI prints?

A. The CPI is Wednesday at 8:30 a.m. Consensus has headline near 3.6 or 3.7 percent and core around 2.5, with energy driving a gap of about 120 basis points. The print covers September, the worst fuel stretch of the year. Everybody knows it will be ugly. It's priced.

Q. Is it priced, or is it forgiven?

A. I'm not sure what the difference is.

Q. Forgiven means the market has already excused the number and will punish the second one. Mid-November. After the midterms on November 3rd. When the G7 release and the Russian barrels are supposed to show up in the pump price.

A. That's a long way out. My window is thirty days.

Q. It's twenty-two days to the election, sixteen to the Fed meeting, and one to JPMorgan. I'd call your window generous.

A. The banks report Tuesday. JPMorgan, Goldman, Citigroup, Wells Fargo. Third-quarter earnings growth is expected above 30 percent for the S&P 500. That's a lot of dinner for a market this heavy.

Q. And the bank index is down about 7.5 percent over the month, while the yield that is supposed to flatter their margins sits at 5.24 percent and nobody can trade it today.

A. Correct.

Q. One more. Gold is at $4,203. Bitcoin is near $83,500. Both of them are the alternative to trusting a currency, and both are shrugging at a week of missiles. Do you take comfort in that?

A. I take it as a sign that everyone who wanted protection already bought it.

Q. Or a sign that nobody believes the protection works.

A. I'd have to see the order book.

THE COURT: The witness has stated its level and declined to state its opinion, which is the traditional practice in this courthouse. I will note for the record that a gauge reading under 16 on the morning after the deadliest attack on Saudi soil in more than a decade is either evidence of great resilience or evidence of an instrument nobody has recalibrated since the war began.

The witness is excused and advised not to leave the screen.

Court reconvenes Tuesday, when the bond market comes back to work.