Macro Theme:

Founder’s Note:

Futures are +40bps, after yesterday’s ~2% decline.

Earnings: AMZN +8%, AAPL -1.5%

Eyes are on NFP, at 8:30 ET this AM. Interestingly, today’s 0DTE straddle is priced at just $44.5, or 84 bps (ref 5,725, IV 28.6%). That strikes us as rather low, given the 2% move, and NFP catalyst.

In regards to yesterday’s selling, the major thing of note was put buying in single stocks. This was a persistent and dominant flow, as discussed in our PM note.

For today we see support at 5,720, 5,700 then 5,650, with no material resistance above until 5,800. You may recall that yesterday AM, when the SPX was near 5,775, there was no material support on our list from 5,780 to 5,700 – well this is the same “empty” range. With that, if NFP is within expectations we could see a sharp move higher, back into the 5,800 zone as short dated “pre-election” IV is sold.

The striking thing we note about today’s market structure is the large amount of 0DTE short put positions traders layered on. This results in dealers long those positions from 5,600 – 5,650 (positive blue GEX bars, yellow box). These puts provide positive gamma support into the 5,650 price area. Should NFP come in hot today, we look at that 5,650 area as support.

The pricing of today’s straddle informs us that traders are not too worried about something that was just triggered in markets yesterday – its more of a heightened focus on next week. You can see this via the Fixed Strike Matrix, wherein fixed strike IV for Monday & Tuesday (pre-election) is lower that on 10/30 (when SPX was >5,800).

A bad NFP today (one that ironically reflects more people have a job…) would likely serve to jack up post-FOMC volatility, as it suggests that rates may be higher for longer.