Bullish Case: VNQ's implied volatility has decreased and is expected to stabilize, suggesting possible market optimism. Recent call volume increases indicate investor interest in upside potential, especially with economic stabilization prospects.

Bearish Case: Economic pressures persist with high implied volatilities for puts and previous downside risks remain significant. Rising interest rates could negatively impact REIT yields, exacerbating declines in property values and investor confidence.

Potential Outcomes:

1. Moderate recovery: 30%
2. Flat performance: 40%
3. Decline due to economic factors: 30%

The mean-reverting nature and flattening vol curve suggest nuanced market expectations.

Trading Oracle:

Consider a Bullish Short Volatility strategy due to the flattening implied volatility curve and high call volumes. Selling ATM put options while buying further OOTM put options leverages market optimism, with a reasonable edge assuming growing economic stabilization.

March 23, 2025