Macro Theme:

Key dates ahead:

 

Founder’s Note:

Futures are up 10bps with no major data on the schedule. SPX AM options roll off at 9:30AM ET, which is the bulk of size expiring for Sep OPEX. Given that, watch for ES swings near the open. Single stocks & all other ETF’s expire at 4PM.\

TLDR: We favor staying long with SPX > 6,600. We will be adding small lotto put spreads and/or flies tied to the 6,500 level for next week/into 9/30 exp. This is because the potential is there for 6,505 to be a magnet into that exp.

Post OPEX the look for SPX GEX is much the same: relative positive gamma >6,505, and due to 6,505, we don’t see negative gamma until <6,400. Given that, we think that if there is a mild pullback post-OPEX it should not break the big 6,505 level before 9/30 expiration.

To the upside, the

Call Wall

remains at 6,650, which is first resistance for today. A break above 6,660 could indicate a larger move into 6,680.

We’ve talked a lot about the SPX IV kink for pre/post Sep 30th OPEX, and that is still in place. Pre 9/30 IV’s are in the gutter – at or below 10%. First, that implies no one sees risk. Second, this suggests to us is that if OPEX does trigger a mild pullback, traders are not pricing that in. Therefore it could be a quick jump into 6,500, but we’d anticipate downside haulting there. That path may not be projected from anyone outside of us in the gamma realm.

SPX fixed strike is smashed, VIX and the VIX complex remains a bit bid. 15.5 VIX is quite rich compared to ~8% SPX realized vol. That decent vol premium can be a vol absorber, which to us backs a 6,500 low into 9/30.

In the sector space, we are seeing call bids pick up relative to puts after FOMC. This is shown as symbols shifting to the right on Compass. If call IV’s were higher into OPEX, or feeling for a big OPEX pullback would be stronger. However, the call/put pricing (and positions) seems pretty balanced to us. The only thing that seems a bit stretched is the SPX price itself. We would say that stocks which are at stretched highs which high relative IV’s are more likely for a post-OPEX correction.