Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are up 80bps, indicating an SPX opening near 6,400. Crude, which was down to 101 is back to highs of 104.5. VIX is at 29.

The range: 6,600 resistance on news there is an end to this Iran debacle. Support for today is 6,250. After today we think that support may drop toward 6,000.

The market is obviously up after Trump said he’d consider pulling out even if the Strait isn’t open. That seems to us like a far cry from “deals on”, and the fact that CL is back near recent highs is an indication that the equity rally is fadeable. We will see.

Let’s talk about the elephant in the room first: JPM and 6,475. Before we get into this I’ll just state that the exact mechanics of this thing seems to morph over time, and may change today. The big takeaway is this: know that some big trades going off today could create large unusual moves.

Further, my main view is that realized volatility may have been throttled by March OPEX and by this collar, expiring today. My base case is therefore that market volatility may now pick up. The tough thing about this statement is that it’s under the context of war.

As you can see in the brand-new TRACE, we have +$20bn in gamma tied to the JPM strike if the market rallies up into that strike today. At current market prices (SPX ~6,400) that is only $4bn. If the market rallies, this large 0DTE negative gamma should provide strong rally fuel. To the downside, negative gamma reduces below. That is a signal that the pull of that 6,475 strike for today is losing gamma-power. On this topic, we see next support at 6,250 (blue zone).

As far as the print goes – historically what happens on roll day is some large 0DTE prints will go up, and that is a signal the roll is underway. In the past we have seen large, unusual market moves into and around these 0DTE prints. These are the kind of moves where you ask: “What is the news? What is going on?!?” etc. At that point of unusual SPX movement we would look to see big +10k lot 0DTE trades print, which is a signal the roll is on. Keep in mind this is all assuming the roll happens the same way it has previously.

Obviously the driver of the exposure is the 0DTE 6,475 put that dealers are short, and JPM is long. That put has a lot of delta tied to it, as you can see for today (left side, blue). At expiration (the vertical line that separates blue from red), that delta is gone, and dealers go from having long deltas, to needing short delta (tomorrow’s delta, red, right side). There are a whole bunch of trades that generally go up to help offset this exposure, but on its face it seems like the expiration of this position should generate some stock buying from the dealer community. For today. Tomorrow that bid is gone, and Hegseth has a conference at 8AM now and so traders will be keying on that.

Does the Hegseth thing matter? It just hit the tape, but it appears so. We see short dated IVs (0-2DTE) up vs last night’s close, while longer dated (>1 week) IVs are lower after the Trump “we’ll just leave” tweet. That vol lower is a good thing for bulls, but, again, why isn’t crude coming in?

As all this gets parsed through we continue to want to own rolling 0-1DTE SPX call ratios or broken wing flies, in this case playing for a move into 6,500 (max move to 6,600). As long as Cl stays >100 we will also be looking to fade market rallies, like with short stock simply because puts remain quite expensive.

Extra credit:

Has the JPM put ever expired in-the-money?

According to our records: once. March 2020 (Covid Crash), where the put expired 18% ITM.

There were 3 times the long put was tested into expiration:

Mar & Sep ’22, wherein the SPX closed+45 bps and +16 bps above the JPM strike (expiring it worthless).

Lastly in Mar ’25, wherein the SPX closed 80bps above the strike.

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