Macro Theme:

Key dates ahead:

 

Founder’s Note:

Futures are +30bps ahead of NFP 8:30AM ET and & Powell at 12:30 PM ET.

TLDR: A massive move is being priced in for today – but we caution that any move, particularly to the upside, is likely to be transient (i.e. quickly revert) until tariff deals are signed. A bad NFP, however, could offer a final flush to the key 5,500 area. This is because longer dated IV cannot fully release until traders believe tariff/inflation risks have subsided. Read here.

We start off with the picture much like that of recent days:

• Negative gamma poised to bring large trading swings
• High implied vols, but not “too rich”
• Large “Captain Condor” positions in the market (SPX price targets)

Added to this is some large event vol for todays session due to NFP/Powell.

You see this event-vol-angst in the SPX term structure, which shows 0DTE IV’s at +50%! That means the 0DTE straddle is a very high $83, or 1.4% (ref 5,740). We think that one has to go back to late ’22 CPI days to find a similarly priced straddle.

Our gut reaction here is that this is 85 handle price might be too high.

What is also curious about this is that the straddle price lines up exactly with a GIANT 0DTE condor…

5740 + $83 = 5,823

5740 – $83 = 5,657

Here is another way to look at this extreme 0/1DTE IV (VIX1D):

With that, we turn to “Condor Watch”, where the infamous Captain Condor has placed a 31k condor at:

• Call Spread: 5825 x 5830 – this is a major resistance level for today
• Put Spread: 5645 x 5650 – this is a “downside target”, more than a support level

This is the 12th time we’ve seen this position over 10k, and the 4th time the trade has been >=30k. And, while the SPX close didn’t close in on the large 19k contract condor yesterday, we will be watching the market to tag one of these two spreads today.

While we are going to be looking at sharp rallies with suspicion, we think downside has “room” ultimately until 5,500. Shown below is “raw gamma” by SPX strike, and as you can see put positioning (blue) wanes sharply <5,500. We think a move down toward 5,500 would also line up with March 21st expiration, and the large JPM collar strike at 5,565 (expires 3/31).