Macro Theme:

Key dates ahead:

 

Founder’s Note:

Futures are off -70bps, with no major data on the tape for today. The 10Y auction is at 1PM ET.

For today we see there is some 0DTE driven positive gamma support <=5,600, and this is likely 0DTE put sellers stepping up as there is no material data prints for today – with eyes on tomorrow’s FOMC. Those same 0DTE traders are likely not to reposition with these short puts in front of Powell. To the upside, we are seeing the potential for some 0DTE call selling in the 5,650-5,700 range, akin to yesterday.

Today, we revisit our classic gamma framework — a model that defines calls as dealer longs and puts as dealer shorts. During the early days of SpotGamma (pre-TRACE), we identified a critical inflection level: the gamma flip point. This is the point where the net gamma exposure of SPX+SPY shifts from positive (dominated by calls) to negative (dominated by puts), signaling elevated market risk as dealer positioning flips.

This concept is visualized in our Combo Gamma chart, which aggregates gamma from both SPX and SPY. Positive bars represent strike zones where call gamma outweighs put gamma.

Negative bars highlight areas where put gamma dominates.

The logic is intuitive — put positions rise during periods of uncertainty, as traders seek downside protection. This aligns with increased implied volatility, broader price swings, and thinner liquidity. As risks subside, those puts are reduced and calls return, bringing back positive gamma and a calmer tape.

What’s striking today is that the gamma flip has shifted up to 5,700 — a notable level. The S&P 500 has rallied 10% off the 5,000 lows, including a fresh, record-setting 9-day win streak. Given that strength, we’d expect to see more positive gamma (i.e., call exposure) building beneath current levels. But instead, the model shows a wall of negative gamma below 5,700 — suggesting dominant put exposure.

If you look back at this model from last Tuesday, April 29th, when the gamma flip sat at 5,500. That told us there were more net calls above 5,500 then — but now those calls appear to have been sold into strength, while new put positions were either added or left in place. This behavior aligns with short-dated, momentum-driven traders. If larger institutional funds were holding calls, we’d likely still see positive gamma between 5,500 and 5,700. And importantly, there hasn’t been a major monthly expiration to explain this shift.

Stated simply: the support is falling out as the market rallies.

Some may argue, “Perhaps traders are simply shorting puts — a logical move in a rising market with elevated IV.” But our data suggests otherwise:

1. Our new SGOI models inform us traders are LONG SPY puts (so dealers are short them, in alignment with the above models)
2. We read the S&P as currently having a negative volatility premium, suggesting there isn’t any juice to squeeze in being short puts

Taken together, it paints a picture of fragility beneath the surface of this rally which warrants owning put protection.