Macro Theme:

Key dates ahead:

Founder’s Note:

Futures are down 1.4%, CL is at 109 and the VIX is 27.8 after Trump’s 9PM EST presser outlined greater Iran conflict.

Something ain’t right, and we are very worried about a major risk-off move here.

CL 109 (USO 135) vs a +2.7 pt VIX move “does not compute”. You can see this in the scatter below, with a huge USO move premarket relative to a relatively sleepy VIX move. Based on a pretty consistent relationship since March 1 (red line), you would think VIX would be near 30 at this moment – particularly since ES is down 1.3% overnight, which is itself earning 22% vol. Toss on that the 0DTE straddle is a mere $55/85bps…again, futures are off 140bps… overnight.

We’d note that some oil fintwiters are saying that its only front month CL moving, the whole curve isn’t shifting up. Maybe the oil market doesn’t fully believe in this move, but we’ve got nothing else to add on this point.

Lets put that 0DTE straddle price into some context. Since March 1, the mean 0DTE straddle for 9:30AM EST is 75 bps. Where is the (implied) vol? Why do I care? Because if that vol catches up to realized, things could get really nasty.

TRACE is showing first support of 6,400 (or maybe we should think of it as “first downside target), as ultimately its Oil that is controlling this show. This essentially means I think at least another 1% of downside is available for today – but lets face it with oil up 10% to new highs into a 3-day weekend…this could get quite scary. That 6,400 area is 0DTE-based support, too, which means it could pull at any time.

To make sure we note both sides: any sudden deal could spark a move right back into 6,600.

One reason equity vol may be light is downside SPX put positioning is light. We only mark ~$2bn of negative gamma at 6,300, vs ~$5bn (or larger, depending on your ATM px) before the collar expired on Tuesday. We mark dealer VIX exposure <30 as a bit light too, and we read that >30 the exposure ramps up. Watching

HIRO

on the open will be key, as if traders head into SPX puts/VIX calls its a sign of increasing downside exposure.

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