Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are +25 bps with no major data on tap for today. “No Major Data” sets the stage for 0DTE traders to strut about, as they did yesterday (+$8bn in 0DTE S&P delta).

The vols are slowly deflating, which is the critical signal to watch for signs of “more rally”. Below is the Fixed Strike Matrix set to stats mode, with red reflecting lower SPX IV’s. In this case we see anything pre-NVDA (yellow box) as reflecting essentially 0 risk, as most of those IV’s are in the 12% area. We mark 1-month realized vol at 11.5% and 5-day is 13.4%, so pre-NVDA vols price in only whats been happening an nothing more (i.e. CPI/PPI jobs are non-events).

Further, we’d note that strikes just 25bps north of current ATM levels (6,860) are showing IV’s with a 10% handle (green box), which is often times cheap for upside calls. Essentially the takeaway here is that no one really cares about the econ data listed this week, and all eyes are on NVDA – additionally, no one is positioned for a sneaky upside move before then.

The other thing to note in this chart above is that the next high IV node after NVDA is into the FOMC. If NVDA earnings clear without issue, markets then turn to Thanksgiving (who wants to own vol over that 3.5 day week), and then look forward to a big FOMC. That’s essentially a month of relative quiet, with traders generally focused on the idea that this is an exceptionally bullish seasonal period. This signals that vols are likely to come in, and sentiment is bullish – two forces you don’t want to fight.

On the topic of bullish prospects, there is a ton of OI at the 7,000 strike, as seen here in raw open interest. 7k is now only about 2% away, and that is the short term upside strike to watch – certainly into Nov OPEX on 11/21 (if not sooner).

While this reads as if we are quite bullish, well, we are, after Monday’s move >6,800, and remain bullish until/unless our Risk- Pivot is crossed (still 6,800). We will look to add some hedges around NVDA ER + OPEX next week.

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