Macro Theme:

Short Term Resistance: 4,500

Short Term Support: 4,450

Risk Pivot Level: 4,500

Major Range High/Resistance: 4,600 SPX Call Wall

Major Range Low/Support: 4,400

‣ The first week of Sep (post Labor Day holiday) is likely lead to lower Index IV’s which supports stocks into 9/11.*

‣ Entering into the week of 9/11, there are a litany of catalysts including: CPI (13th), big Sep OPEX (15th), VIX Exp & FOMC (20th). *

‣ While we have no particular reason to be bearish, we note that a strong rally into OPEX/VIX Exp would certainly clear up the downside “padding” that we’ve been enjoying (and discussing) over the last few weeks. This could make downside into end of September/October “more available”. Traders looking to hedge may want to therefore consider put positions before the 13th.*

*updated 9/5

Founder’s Note:

Futures are +15 to 4,525. Resistance above is at 4,470 & 4,500. Support below is at 4,550 and 4,431. The estimated one day move is 0.64%.

In QQQ resistance is at 374 & 375, with support at 370.

Last week, particularly the tail end, was rather dull and we anticipate that extending into today & Tuesday. Then, we have CPI on 9/13 feeding into OPEX on 9/15. This should spark an increase in volatility, but a “full release” likely doesn’t come until 9/20 VIX Exp/FOMC.

Following the Fed we think the S&P has the potential to push towards either 4,650 to the upside, or 4,200 to the downside by the end of Sep. These potential moves would be driven by the removal of large OPEX/VIX Exp positions, & the implied volatility shift around FOMC.

For today into tomorrow we think the S&P holds into the 445 SPY/4,450 SPX to 450/4500 range, as those strikes are emerging as the top gamma strikes over this OPEX week. Volatility, we believe, will continue to be rather tight until Wednesday, too.

On the subject of volatility, all of the various vol indicies are reflecting this low volatility. This tells us that both at-the-money IV’s are down, but out-of-the money has a low bid, too. We think the market is underpricing volatility into end of month given the litany of catalysts outlined above, and the JPM collar positions listed at the end of Sep (4,660 calls, 4215 puts).

Those end-of-month price targets are fixed, so if we, for example, stage a rally after a low CPI then that may reduce the rally potential for post-FOMC. Therefore as we look into long volatility positions, we think legging into them tomorrow afternoon makes sense. Also, to be clear, long volatility means that we believe the market could move up or down more than the market is pricing, and so we will tomorrow be proposing a few trade structures to express that. Generally speaking, it will be likely be something along the lines of long Dec ~95% puts vs long Sep 29th 102% calls, looking to balance out the trade initially on delta.