From the first futures in 1848 to today’s zero-day options, Cem Karsan, Mandy Xu, and Ed Tom chart how derivatives have moved from the market’s periphery to its center of gravity. At the core is Cboe’s new VIX decomposition tool, which disentangles moves driven by downside hedging, upside speculation, and shifts in the volatility surface. Through episodes like the yuan shock, Volmageddon, and 2024’s “Liberation Day,” they show how positioning can amplify or mute risk, and why vol sometimes rises into rallies. This is a guided tour of volatility’s inner workings, and how reading its structure can reveal the market’s next move before price does.

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Episode TimeStamps:

59:42 - Introduction to the series

02:21 - Where did options come from and where are we going?

10:20 - The purpose and mechanisms of the VIX decomposition tool

18:55 - The history of the VIX index

23:20 - The beginning of a volmageddon

26:24 - A comparison between 2 recent volatility events (August 2024 and April 2025)

35:03 - Key indicators for understanding risk in markets

42:23 - The current state of 0DTE options

50:29 - The optimal way of using VIX and hedge options

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UGO05: Volatility’s Blueprint: How Markets Really Move ft. Mandy Xu & Ed Tom

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