Macro Theme:

Founder’s Note:

ES futures are +40bps, NQ +80bps, after TSM reporting very strong demand (TSM +8%). Traders now turn their attention to 8:30AM ET Retail Sales.

The S&P remains in a stable, positive gamma stance. Resistance is heavy at 5,900, with support at 5,850, 5,820 & 5,800.

There is no apparent 0DTE Condor trade today, after Captain Condor narrowly grabbed victory, yesterday (see y’day Founder’s Note). We were surprised the 5,845/5,850 condor spread was not traded through at the close, but that position instead acted as a clear resistance point. What seems different about yesterday’s position is that, contrary to Tuesday, no large contracts at/near the condor strikes shifted after ~3PM.

Moving on – Do retail sales matter? The 0DTE straddle is a lowly $25 (42bps, ref 5,865 IV 16.1%), suggesting there is not much volatility tied to this data print.

TSM’s big ER beat is clearly the bigger signal, as positive TSM earnings imply that NVDA (+3% pre-market) is doing well (TSM is a large NVDA supplier). As you all know, we believe NVDA is a core driver of equities writ-large (see here), and its our preferred way to play a bullish post-election move (here). What we find so interesting about NVDA at this juncture is that it seems traders have been selling upside calls, generating peak positive-dealer gamma at 140 (top, darker curved line).

Tomorrow’s expiration removes a huge chunk of that 140 area positive gamma (resulting in a new projected gamma curve at at lower line), leading us to wonder if future NVDA upside is even easier…and that is saying a lot given the stock is +18% this month.

For the S&P, all eyes are on the 6k strike as destiny. That strike is now just 2-3% away, and is likely an upside focal point into month end. We continue to be of the view that OPEX can draw some market consolidation, given the call-heavy expiration. This could create some distance back between prevailing SPX prices & the 6,000 strike. And, while we think there will be an OPEX related pull back, we just don’t see a setup for a very material correction in the SPX (at most 2-3%).

The problem with our-post election rally view is that:

1) It’s starting to look like an “uber-bullish” setup, given the strong current rally & addition of positive vanna flows (from election IV crush). Nothing is this easy, is it?

2) its rapidly become very strong consensus.

This somewhat bolsters the idea that a mild correction is due, to shake out some bullish sentiment. Further, should this rally continue, one has to think it is “pulling-forward” a lot of the post-election sentiment.