Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are 80bps higher, indicating the SPX will open >7,400. This is a recovery of our Risk Pivot.

Overall gamma is more positive now that it was yesterday. This reads as traders took the opportunity into weakness last week to sell put options, providing dealers with positive gamma. Its a holiday-shortened week (Friday is closed for July 4th), which allows traders to step up and sell vol. This tips the edge back to bulls. The big upside zone to watch is into 7,500, a region (black box) that is a +95th %’ile gamma zone (not a strike, but a zone). Further, this not a 0DTE block, but mixed expirations which sets this up to be a key resistance area >=today.

To the downside, there is a soft pocket from 7,380 (Risk Pivot) down to 7,300, with support in that area. We’ll need to keep an eye on oil/rates here, as the Iran deal seems under pressure given some flare ups over the weekend.

This short term bullish setup comes into a market that features disjointed volatility markets (see Friday AM note), which are creating spasms. Here we have the COR1M (blue) vs QQQ (red), and you can see that when COR1M goes <8, there are some violent forward moves in the QQQ’s (-7% & -5%).

Those spasms recover quickly, as it seems traders are simply monetizing that volatility by selling puts into weakness which helps stocks recover.

Here is the day over day single stock call change, and you see buy side on net bought calls to open on Friday.

On the put side, they bought them (blue) but they largely took the opportunity to monetize long puts into weakness (orange, stc = sold to close). On net that leaves a pretty slim margin of net long put openings. That’s not really panic.

Rounding this out, we again go back to this chart of QQQ IV (red) vs RV (blue). The QQQ IV is higher than at any point since Covid, which is incredible given its just a few percent from all-time highs. The IV trades for LESS than RV which is very unusual, unless you were coming off of a major market crash. This signals to us that traders are monetizing/selling this high QQQ IV, which should continue to be a supportive feature for tech stocks. It may be why the spasms only last for a day, because the vol is so rich is worth selling.

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