Macro Theme:

Founder’s Note:

Futures are fractionally higher, off of some rumors of a 45-day ceasefire. No official confirmations have been made on this point, but Trump is speaking at 1PM EST.

Oil is down ~1%, with CL still marked above 110. We’ve been of the view that CL >100 would “break things”, and that certainly did not (yet) come to fruition on Friday as CL was +10% with SPX essentially flat. Things have only gotten more… bizarre?… over this weekend after a US pilot rescue, Bondi & some generals fired, etc.

TRACE showing positive GEX resistance >=6,600, which is similar to what was seen last week. We will continue to view this as resistance until 1PM, at which point anything goes. That “anything goes” is particularly true to the downside, where we see no material positive gamma support below – at any strike. Its not to say that negative gamma is massive below, however a sharp downside move that corresponds with an IV spike would create a nasty mix of bearish flows, in which case we’d start to look at the 6,250 area as first stop.

Here is the SPX GEX, and you can see that it essentially decays into lower SPX prices. This reveals a fairly quiet customer long put position, which is why we flag 6,250 as a first stop – it looks like initial exhaustion and would likely correspond with a VIX number in the 40s which would be a healthy vol premium.

While the SPX does seem to be incredibly stable despite the high oil prices and general insanity, stocks calls essentially have “no bid”, with call skew percentiles all <10%. Put skews are the opposite: +90%. The result of this is that Compass shows all symbols to the lower left on this chart. The key here is that overall IV is not that high, and so while this is quiet bearish, its not yet an “oversold” because we haven’t seen the big IV spike. On this point, if you wanted to hedge a right tail move, getting long some single stock calls, particularly Mag 7, remains a cheap proxy for a big stock jump.

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