Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are up 25 bps, with no major news on tap.

TLDR: We don’t see much to do/update here vs recent notes. The play remains betting on IV declining into VIX exp/OPEX and the upcoming 3-day weekend. Today may have the additional chance for a 1-day rally, as VIX options expire tomorrow AM. The expiring of long VIX calls could serve to push equities momentarily higher.

The vol “crushening” is well underway, as shown below in the 1 week change in 30 day SPX skew (last Tues = gray, today = teal). You can see the crush is particularly strong for calls >5,600, which is a signal that calls are being shorted up into that area. This largely remains in line with expectations.

In TRACE we do see some evidence of calls sold >=5,600, but the big positive gamma strike rests at 5,500. This contrasts against a gamma-map that still remains negative (red), suggesting dealers remain net short of options. This position has them buying into rallies, and selling market declines. However, we think that fuel is becoming much less powerful as we approach VIX exp/OPEX, and per recent notes, underlying liquidity should be improving, 0DTE option sellers are stepping up, and the short vol players have clearly emerged.

The takeaway here is that the 5,400 – 5,500 range remains our “fair value” zone (resistance @5,500, support @ 5,400).

Just to frame up VIX expiration, you can now see the latest dealer positioning in the SGOI/EquityHub. Our very early AM model shows dealers short VIX gamma from 25-30, with a small long gamma position at 30. This infers that if VIX breaks <30 there could be a solid move lower in VIX, and that pressure likely remains in play until tomorrow AM at 9:30 EST. Today is the last day that VIX 4/16 Exp options can trade, and so a lot of VIX value may be shifting today. Again, we think this is equity supportive for today.

In regards to Thursday’s equity OPEX, the surprise is how quickly the single stock space appears to be balancing. In other words, this OPEX was very put-heavy last week, but we now see that put vs

call delta

is nearly 50/50. Quite frankly its not all that put-skewed on the S&P side, either, suggesting there isn’t much of an OPEX put crush to spur a further price rally into next week.

If anything, we are starting to feel like this OPEX/weekend may remove some support for equities into the end of month. As such, we will be looking to clean up some of our short volatility positioning into Thursday.