Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are 1% lower after Trump signaled a higher level of conflict with Iran. With that, CL is +1.5%.

A big CPI print is this AM at 8:30AM EST, with ORCL ER tonight.

The Risk Pivot remains at 7,390, which is an indication that we do not see the SPX regaining a “safer” stable/lower volatility position until >7,390. We will adjust this level as we see positions change.

Resistance is at 7,400. In terms of support, there are no major levels on the board. Support is about the reduction of bearish flows, similar to how the S&P Equity HIRO indicator was the big signal during yesterday’s session (see the PM note).

With all of these shifts we see the SPX 0DTE straddle priced at $74/1.01%, which is quite high relative to historical standards. This tells us that the market is indeed pricing in a lot of volatility. To put this more in perspective, a quick run of the 9:30AM EST SPX 0DTE straddle price shows that $74 would be the highest straddle since late ’25. There are times when the 0DTE straddle is not pricing in much relative movement vs what traders may expect – but for today that is not the case. We also note SPX fixed strike vols are higher vs last night for all expirations, which is a sign traders are indeed a bit nervous at this juncture.

The TRACE SPX map shows that market makers have positive gamma “arching” lower over the day (red arrow) – and this positioning is offsetting large negative customer gamma. This “arch” is due to the path of time decay of 0DTE positions. Note that this MM gamma, while positive, is very light at ~$550mm (~10th %’ile). If we see several more billion in negative deltas on HIRO, this positive gamma will not hold the market up.

The headline issue for traders today is that options screen as quite expensive. This makes buying single leg put protection somewhat prohibitive, but we do like looking at put fly structures that benefit with a move into 7k by 6/30 expiration. This is because bearish positioning would significantly appears to wane into SPX 7,000, which is the area of the JPM Call Strike which expires on 6/30. We would anticipate that downside level offering significant market support, particularly into 6/30 expiration.

“Expensive” is also true of call options. If the CPI is clear, and traders wave off potential Iran escalations (lets face it – that’s all they’ve been doing for weeks), then a quick rally back up into 7,500 could certainly be in the cards into Friday or early next week. We like call flies to play this, with structures similar to 7,500 x 7,600 x 7,700. The idea with sliding these flies higher is that we seek to offset the cost of the long 7,500 call, vs trying to bet on the market pinning our strike into expiration. Then, in a market rally, this farther OTM call fly may start to generate positive PNL via positive delta. Whereas if you have lower strike flies the body of the fly may generate more negative PNL (particularly in an initial rally) than the lower strike call.

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