Macro Theme:

Key dates ahead:

 

Founder’s Note:

ES futures are 12 bps higher.

Resistance: 6,100, 6,120

Support: 6,050, 6,020, 6,000

As we laid out in last nights note, traders bought yesterday’s CPI opening in a big way, particularly in major single stocks like AAPL & TSLA.

CPI passing has cleared the way for some light vol contraction for short dated expirations which contained some event-vol premium (giving bullish a small edge). We can see this IV decline in SPX fixe strike vol, which shows Tuesday’s PM vol against this mornings.

Vol out past Feb is flat to mildly higher, which is not all that surprising given that it essentially no event-vol premium, and is near a statistical lower bound (i.e. its already “cheap”).

IV for tomorrow is a elevated with retail sales on the tape.

We’ve been pitching the idea that IV is cheap here, which on net warrants the purchase of options (both calls and/or puts. We been (uncomfortably) discussing long call options in particular, as we see call IV as very reasonable, and the fact is that traders into CPI have had no real interest in getting long downside volatility hedges. This lack of hedging despite poor earnings, tariff headlines etc.

Yesterday was another great example of this “can get stocks down” dynamic, wherein calls were bought right at the opening dip. Take, for example, the S&P500 equity basket which shows +$2.2bn of positive deltas (

HIRO

) bought over the day. If CPI was such a disaster you would think that at a minimum calls would be sold, and into a really scary outcome puts would be bought. That didn’t happen.

The second dynamic we thought would change post-CPI is the 6k-6,100 “box”. That range has dominated over the last month.

Yesterday’s SPX open was right on 6k, and that led to a rally right back to 6,050 (squarely in the middle). We continue to see a layer of positive gamma strikes from 6,100-6,150 above, which should offer some stickiness. Below that area price should, on “daily” time horizons, remain fluid. A break <6k is likely a signal of a long term volatility spike and sharp equity drawdown.

That upside area, which coincides with all time highs, has obviously been violently rejected on its last 3 tries over the last month. 2/3 rejections have been tariff related, with one “DeepSeek”. The “half life” of the reaction to these tariff threats seems high, as traders clearly aren’t placing major hedges against significant market declines. We also think that if single stocks can catch a bid (i.e. Mag 7s) then that could force the SPX >6,100.