Macro Theme:

Founder’s Note:

Futures are off 20bps, which is an improvement from overnight -100bps.

Wed PM NVDA earnings is the big concrete data point this week. There are less tangible risks: tariffs, Iran, Mexico…likely don’t matter until they matter.

Post-OPEX we remain staunchly back to the place which has been so tough to overcome: 6,900. Currently we see 0DTE positive gamma above that strike, which offers positive gamma resistance. <6,900 we see negative gamma, and that negative gamma increases into the 6,600s. Note that if you remove 0DTE, you see gamma for the SPX is negative across the board. What’s the takeaway here?

We’ll, on Friday we showed how the stats all pointed to a bullish outcome out of OPEX, despite our “feelings” to the contrary. As it stands, the negative gamma below presents a soft underbelly to this market – but that dynamic is no different from that of recent weeks (if not months). Positive gamma has persistently been placed above and into the 7k area, which provides resistance. The SPX has not been able to overcome this resistance.

Vol is also in a weird spot. VIX 20 is the staging area for crashing – which isn’t great. However, with 1-month SPX IV at ~14%, one could argue there is some vol premium to crush. Decent NVDA news and the decaying of any small Iran risk probably allows that vol premium to shrink. TBD.

Lastly, this GS gamma chart is making the rounds. Last week is was some chart crimes related to PC ratios that went viral, now it’s “zero gamma”.

A few things on this:

1. Its not terribly clear what “S&P Dealer Gamma” is. Our models for SPX is above, and we’ve not seen +4bn of positive SPX gamma in some time. We assume its some kind of aggregate across stocks and S&P. We model SPY as largely negative gamma ($-4bn), and then single stocks were largely positive due to buyside selling puts, which is where we think the GS model was picking up positive gamma. Friday’s OPEX removed a lot of that single stock positive gamma.
2. The zero gamma on these charts coincides, and we’d argue is linked to major drawdowns (3% in April ’24, 5% in July ’24, then tariffs in April ’25, etc). Perma-bears love this chart because it suggests huge volatility is ahead – and based on the sample size of 3 it seems that maybe equities bounce out of these zero gamma events.
3. What’s different here is the dispersion: single stocks are telling a different story relative to index. IF the big single stock positive gamma was being held up by Feb OPEX, then you would think single stock vol would maybe now pick back up, or index vol will increase to sync with single stock vol.

Ultimately we covered these angles on Friday AM, the TLDR remains the same: it makes more sense that the vol space realigns with a drawdown and vol spike (VIX ~30). Conversely, we have to acknowledge that SPX could resume the grind, and single stock vols would come down to match the relatively lower index vol. We use the Risk Pivot to decide which way to lean, and that currently resides at 6,800 (we moved it to 6,800, from 6,900 on Friday).

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