Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are up 12pts this morning with ES at 6,935. VIX is at 18.55 (-3%), and WTI has pulled back to 96.70 from yesterday’s 99 close. The Hormuz naval blockade is active, yet Monday’s +1% session pushed SPX to 6,886 — above the pre-war 6,879 close from Feb 27, officially erasing the entire Iran-conflict drawdown.

The CENTCOM clarification was key: the blockade targets Iranian ports only, not general Strait transit. That distinction separates a geopolitical escalation from a global supply shock. For now, the market is treating this as the former, and the vol complex agrees — VIX sub-19 into an active naval blockade tells you sentiment has fundamentally shifted. The risk remains that a Hormuz incident that sends oil back above $100; that’s the only catalyst that likely breaks this market right now.

The blockade panic seems to be, so far, a one-day event. The idea of selling index vol vs long single stock vol remains strong as we see single stocks breaking higher. VIX compression continues despite US military action. The market data may start pivot ing to earnings, and today is loaded: JPM, WFC, C, JNJ, BLK all report this morning. Goldman’s blowout yesterday — record $5.3B equities trading revenue (+27% YoY), $17.55 EPS — set the bar high. Eyes are particularly on ASML (today) and TSM (tomorrow).

Looking at the gamma structure, it’s a positive gamma regime with positive gamma from 6,600 through 7,000. For today we now see large positive gamma >6,900, which should be resistance.

Tomorrow is a large VIX expiration, and we see a ton of VIX puts (+800k) from 20 down through 17. Roughly speaking, the relationship between VIX down to SPX up has been ~50 bps, meaning 1 pt VIX drop = 50 bps of SPX rally. VIX going from 21-22 Monday to 18’s today is probably good for +1% of SPX influence, and we think the VIX is only going to be pressured lower today and when combined with all that positive SPX gamma, stocks should be stable today.

Tomorrow AM at 9:30 EST Apr VIX contracts expire, and so we have a bit less confidence in market stability. You can see then into 4/16 and a small-to-medium sized 4/17 OPEX that the trend is for more negative gamma (red>blue). This infers that markets should start to move again. If earnings are strong, and peace remains, we don’t discount a break to fresh ATH’s. To play this, we have been suggesting shorting SPX/SPY calls vs “cheap tech IV” like NVDA (see “Macro Theme”).

Puts are certainly now cheaper too, and that may mean that headline shock could “matter more” in the days ahead. Again, with those cheap Mag calls, the downside risk is much better defined.

Our VIX data shows that it’s been puts in heavy demand relative to calls. With expiration tomorrow, traders are not looking weeks ahead – it’s: “just squash vol into tomorrow AM”. Tomorrow we lose ~49% of all VIX call OI (3.8mm contracts) and ~58% of all VIX put OI (1.8mm contracts). ~5.6mm total VIX contracts is a lot: a preliminary data check suggests this will a top 7 reduction in VIX positions.