Macro Theme:

Key dates ahead:

 

Founder’s Note:

Futures are +10bps with no major data on the tape this AM.

The big strike to watch today is 6,400, which appeared to be reduced into yesterdays close, but we see it at a large 0DTE 17k this AM. These +99th %ile strikes have a habit of being tagged on an intraday basis. Also note that all strikes around ATM are currently positive gamma positions, which infers market support for today.

Today is likely not a “vol bid” kind of day due to the upcoming weekend and the fact that they’re out there smashing short dated vol with everything they have. To this point, we see Monday’s ATM IV holding a 6 handle… welcome to the lower bound.

Who is “they” you ask? Well apparently everyone because there is not a put buyer in sight – which in an of itself may be a reason to buy some 1-2 months puts/VIX calls. Maybe those puts don’t pay, but, at 6% IV, the cost of carry is essentially zero.

The obvious question is “what’s the trigger for downside?”, and we quite frankly don’t have one. That being said, while short volatility appears to have pressed IV to a lower bound, there is also a relative bid for calls vs puts, which also reads as “crowded longs” as all sector ETF’s show in the bottom right of the Compass grid. All it would take is a little scare to reset this vol higher as no one is position for any volatility, and so even a bit of movement can trigger some long vol buying. Again – this is something that we put in the “so cheap I just have to buy a few puts” bucket, as we do not now have a known catalyst. As we have been stating, should the SPX break below our

pivot/

Vol Trigger level of ~6,300, then we would be moving into equity short/long vol positions with more vigor.

On the note of “uncertainty” – while yesterday’s Trump FOMC visit didn’t spark a vol bid (nor polymarket “Powell out” bid), this screenshot we took from the press conference just makes us feel like things are under control…

Speaking of downside, we wanted to flag the slippery downside in BTC, which was a breakout leader and likely triggered a lot of crypto-stock buying over the last weeks (COIN, MSTR, IBIT, etc).