Macro Theme:

Key dates ahead:

 

Founder’s Note:

Futures are flat ahead of 9:30AM ET VIX expiration. NVDA CEO gives a keynote at 1pm ET.

Things are thus far unfolding according to plan, with the SPX lows of 5,500-5,565 giving way to a VIX expiration rally into 5,700 (chart from Thursday AM). Accordingly, we are now looking for this mornings VIX expiration to mark a local high in equities, as VIX calls are cleared out and traders shift their attention back to macro: FOMC 3/19 and tariffs 4/2. The target/major downside support zone this week remains 5,500-5,565.

Last night we covered how the drop in VIX was not an actual volatility decline, as fixed strike vol was flat on the day. This syncs up with this mornings VIX expiration being a potential stock topping point into tomorrows FOMC + Friday OPEX.

We also see sticky-skew in the single stock space, as shown below, with most large stocks holding <20 skew ranks. This implies that put IV is still elevated vs call IV. We would expect skew ranks to lift if/when traders have bullish views.

Views out of this week feel a bit more tricky. Our most comfortable view is that 5,500 – 5,565 remain a likely low into the end of the month – unless Powell comes with a strongly hawkish view.

Obviously this Friday’s expiration is also going to clean up a lot of the large short call/long put positions weighing on equities, which could sync with a short term rally.

The looming threat to a rally remains the known-unknown of tariff deals, with an alleged deal deadline on 4/2.

With that, we think those that have shorter term time frames may want to meet further weakness by positioning into end-of-month short put spreads or broken wing put flies, with the idea that a relief rally could come next week.

If you have a longer term view, we think (into fresh equity weakness) looking for >=April Exp call spreads and or re-entering 1×2’s is one sensible way to position.