Macro Theme:

Key dates ahead:

 

Founder’s Note:

Futures are flat.

Resistance: 6,085, 6,100

Support: 6,050, 6,030, 6,000

TLDR: Some positive gamma should rebuild if the SPX pushes into 6,100 – gamma is currently flat. This implies that volatility should start to contract, which adds a bullish tailwind for stocks. We’d note, though, that SPX had no problem falling violently from 6,100 on the last two attempts (highlighted below). For this reason we prefer to express upside via call options (fixed risk) vs long stock. To the downside, we would look to be short equities on a break <6,000.

In yesterday’s note we spent a lot of time discussing volatility – specifically the lack of volatility being priced in. The 0DTE straddle was priced at just 58bps, and the SPX had a 62bps open/close rand and +90bps high/low range (i.e. higher vol than priced in).

Today we see even less vol than expected: the 0DTE straddle is just $27.7, or 45bps (ref 6,065). We obviously view this as cheap, particularly given the illiquid jumpiness of recent markets (ex: tariff headlines spark +1% swings).

Betting against market volatility is the infamous Captain Condor. After losing on their trade yesterday (and the day before), they have come back with a ~4k condor position at:

• 6,080 x 6,085
• 6,035 x 6,030

The SPX consistently tags one of their 2 spreads, and we’d expect no different today – particularly given these spreads are just 25-40bps away from indicative SPX open (6,060). One can’t help but want to take the other side of these trades, given its negative skew (they make ~$1.5 when right and lose ~$3.5 when wrong), and loss rate.

Whats interesting about this is the 0DTE straddle yesterday was 58bps – which was the condor call spread distance from the SPX open. Is it possible that the vol being priced for 0DTE is controlled by the condor? Its just a theory for now, but warrants watching…