Macro Theme:

Key dates ahead:

 

Founder’s Note:

Futures are 10 bps higher, with ADP employment at 8:15AM ET and ISM PMI at 10AM ET.

We note MRVL reported last night, and is +10%, which bolsters the semi/AI story.

Key support remains at 6,800, with resistance at 6,850 then 6,900. The Risk Off Pivot holds at 6,775.

While the SPX gained 5% from Nov OPEX to Black Friday, the last two sessions have brought a tight trading range from 6,800 to 6,850. Today’s SPX straddle is a very tight $29/42bps, which implies that today’s ISM Services PMI is a non-event. On this topic, you will occasionally see the 0DTE SPX straddle in the high 30bps, but thats as low as it gets. Overall this signals that short 0DTE vol/options is not a great strategy, unless you can play credit spreads into a fast move down into 6,800/up into 6,900.

SPX vols are also unchanged since Friday’s close, as you can see with this AM’s vol (teal) vs Friday’s close (gray). This highlights vanna has been removed from the equation after being such a dominant force during the November vol collapse (VIX ~25->17).

As discussed yesterday (and several times over the past 2 weeks), the movement of vol is tied to upcoming data/events, with the QQQ event volatility defined below. As highlighted above, today’s straddle is about as tight as it gets, suggesting no event premium today and therefore we don’t have much of an expectation for SPX >50bps of SPX movement.

Given the anticipation of another quiet day, we turn to single stocks.

Two names highlighted yesterday, SLV & MSTR, have shifted slightly in favorable directions for put flies & call flies, respectively. We think that these trades are still viable if/when implied vols decline (see y’days note).

We are also now eyeing TSLA/PLTR (and to a lesser extent SPY/QQQ/IWM) as long options plays into the end of December, given they scan as low IV rank (bottom of Compass). While we are looking to lean long into EOY due to SPX >6,800 and the drop in event vols over the next week (making TSLA/PLTR calls viable), traders can also buy put options in these names if they want to express downside. Again, this is about end-of-year setup, as we think chop/grind could prevail into at least end-of-week if not until next weeks FOMC.

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