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Founder’s Note:

Today we are extremely excited to announce FLOWPATROL, a new report detailing all the biggest position changes in our SGOI model – this is the model that powers EquityHub. Go here to get it in your inbox each AM. We will be live at 10:30AM ET discussing the new report.

Futures are up 10bps will no major news on the docket.

Crypto is the big winner today, with BTC >120k, and ETH +5% since Friday and +15% over the last week. This matters to us in the equity space due to 1) a signal of “risk on” and 2) crypto is becoming a bigger weight to the equity indexes.

In SPX, if 6,400 holds, particularly post Tues CPI, then we see a pretty clear path up to 6,500 and the JPM Collar position into Friday OPEX. Boosting that would be a vol contraction, a concept we discussed in depth on this weekend’s OPEX Effect. The core idea here is that the market is looking at a 90% chance of a Sep rate cut, earnings are good, and tariffs have arguably shifted to a side risk/punt. Jackson Hole & NVDA ER are the big upcoming risks into end-of-August.

On that note NVDA is now +8% of the S&P500 which is alleged to be the largest single weight ever.

To the downside, the positions that add negative gamma are de minimis. You can see that in the chart above, wherein there are very few negative gamma strikes (negative gamma would come from traders owning puts). We have been in a risk-on stance since the SPX recovered 6,300, and we remain in a risk-on stance as long as the SPX is >6,350. Sub 6,350 we would look for support at 6,300 – and if 6,300 breaks we’d flip to a net short.

We currently think puts are fairly valued in this environment with SPX IV’s near 15% (and VIX 15.7), but 1-month SPX realized vol is <10%. Given that, the “puts are so cheap we have to buy some” comes back if the SPX IV’s get closer to 10%. Later this week, with benign data, could provide that opportunity (into OPEX). Part of the risk-mitigation strategy we’ve preferred here is to own upside calls in lieu of owning stock, because calls are cheap in leading sectors. If the market tanks while we own cheap calls – well so be it. This vs owning stock and then having to consider buying put hedges and dealing with carry costs.

What cheap calls are we referring to? The scanner shows SMH, QQQ and IWM in particular which is pretty interesting given NVDA is now #1 in the SPX and the Q’s were up 2.5% last week.