Key dates ahead:

Founder’s Note:

Futures are -20 bps ahead of retail sales data.

Friday finally brought the rally we have been looking for, it did though fall a bit short of our 5,650 – 5,700 target zone. We think there is a solid chance that could happen today with VIX expiration (discussed below). A slow/stalled out move today could also reward call 1×2 holders that entered those positions in the 5,500 – 5,565 lows. Zooming out, we think a more protracted rally here is not quite in the cards to to FOMC this week, and OPEX Friday.

For today, the 5,685 – 5,700 remains key resistance, with major support at 5,570. Gamma is flat to negative, suggesting more fluid/high vol price action for today.

The aforementioned support/resistance levels were key zones last week, and they are reinforced today by Captain Condor, who is back with a 4k contract SPX 0DTE condor at:

• call spread: 5,680 x 5,685
• put spread: 5,580, 5,575

Today is also the last day March 18th exp VIX options can trade. In the past we’ve seen evidence that VIX exp can influence S&P prices, particularly with “phantom” directional moves. This as traders buy & sell SPX options in relation to the VIX index price.

In this case we believe dealers are net short VIX options down to 19. 20 also stands out as a massive expiration strike, with a giant 290k calls and 161k puts set to expire. To the upside, 25 is the major OI strike, with 200k calls and 30k puts. We view this as a possible “max pain” scenario, wherein VIX moving to one of these two levels targets the most underlying value.

The takeaway here is that there could be some sneaky underlying influence that leaves many non-options watchers scratching their heads. We wouldn’t necessarily trade on this hunch (as its priced in), but if you see the market behaving as follows it would “make sense”:

SPX closing today at:

• ~5,680 and VIX 20
• ~5,575 and VIX 25

The SPX 0DTE is priced at $47.5 (ref 5,620) or 85bps, meaning the options market is nearly pricing in this exact SPX underlying move (5,620 + 47.5 = 5,668, 5,620 – 47.5 = 5,572), which implies that there is not a ton of edge in betting on one of these outcomes (at this point).

Ultimately, if we push the SPX up to this 5,680 resistance into VIX exp tomorrow AM, it will feel like a solid short opportunity. Conversely, a move back the large JPM area may be a nice opportunity for short dated put flies and/or 1×2’s.