Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are flat, with no major data on tap for today.

TLDR: Resistance remains stiff at 6,900-7,000. The underbelly remains soft, particularly if SPX re-breaks <6,800. Given this, we watch for the same swings through 6,800 that has dominated since Thanksgiving.

Well, here we are…back squarely in the box. And while the SPX is dead-smack in the middle of the range that has prevailed since Thanksgiving, vol is a healthy 1-2 points higher. We’ve been making the argument that “we ain’t gonna rally until vol comes in”, and vol can’t truly come in until the volatility premium tied to the Middle East comes off. We’re watching oil as the early tell for risk on that front, and WTI is just 1% from post-Friday highs (+15% overall).

Why does this matter?

Because a week ago, everyone thought the world was ending because a “blogger” wrote about the Software/AI apocalypse. Ironically, now we arguably are WW3-adjacent, and people are turning bullish? You can’t make this stuff up…

Meanwhile, SPX has simply mean-reverted back into the trading box that has dominated for months.

Through all this, the positional picture seems largely the same: positive gamma (resistance) >=6,900, and negative gamma (no support) below. But now we have the aforementioned vol premium, and we’d argue that 6,900-7,000 is even stiffer resistance until that vol premium can release, and the downside is more slippy as “vol” is supported by wars. However, IF that vol premium can come in, that might give the final boost to break 7k.

Why does the SPX seem to bounce even though the gamma is negative below? We think its due to sell side holding a ton of single stock long puts. This is the dispersion trade: buy-siders are long SPX puts vs short single stock puts.

Consider software as an example. Those software IV’s were sky-high last week, and they have been dropping like a rock since (red arrow). Meanwhile, SPY has held a +90th %’ile put skew rank. Not a bad trade when your long vol doesn’t drop and your short vol gets crushed.

When can this trade itself break things? I’d argue when the trade has been fully milked, which seems to line up with when COR1M goes <8 (as a rough proxy). These were the spasms that kept occurring through to Feb. Another such spasm doesn’t seem to be in play (yet), and so I don’t think this dispersion issue is material at the moment – further I’d argue that it helps to support markets (dealers buying single stock deltas on dips). None of that may stand up in a true WW3 situation, wherein traders dump stocks and move to, say, bonds.

©2025 TenTen Capital LLC DBA SpotGamma

All TenTen Capital LLC DBA SpotGamma materials, information, and presentations are for educational purposes only and should not be considered specific investment advice nor recommendations. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. VIEW FULL RISK DISCLOSURE https://spotgamma.com/model-faq/disclaimer/