Macro Theme:

Key dates ahead:

 

Founder’s Note:

Futures are up 50bps heading into today’s OPEX. Markets are closed tomorrow.

Jobless claims & housing starts are up at 8:30AM EST.

SPX AM options expire at the 9:30 AM cash open – so watch for unusual ES/index price movement around that time.

TLDR: We were calling for a short term top with VIX exp/OPEX. Since Tuesday’s close, the SPX is down 3%, which invigorates put values into todays OPEX. Further, into a 3-day weekend, we think traders are less likely to want to carry short dated long puts/vol positions. This combination (OPEX, 30day w’end) may be supportive of equity prices today. Ultimately, the SPX near 5,300 leaves us a bit in no-mans land, as we see resistance at 5,400, but no material support until 5,000.

To the point of “no mans land”, today’s OPEX serves to remove nearby positive gamma – which was light to begin with. You can see this as the TRACE map changes after the 9:30AM SPX AM expiration, & the AM exp contains ~50% of total (across all index/stocks) expiration value. Note, again, that after 9:30AM ET there is no blue on our map whatsoever (yellow box). This informs us that, at current, there is no target price zone within ~100 strikes (or more).

If we look at the projected change of SPX gamma post-OPEX, we see that the 4,600-4,800 zone remains major support due to large dealer positive gamma strikes (red box). To the upside, there are a few positive gamma strikes in the 5,400-5,450 range, the price area that we are still treating as a likely resistance zone.

The big shift here is that we look set to lose some ~5,800 area upside negative gamma, seen as the current GEX line (dark blue) shifts higher to the yellow GEX line post OPEX.

This loss of upside negative gamma is interesting because upside IV has been quite sticky through the last 1-2 weeks. Below is 1-month SPX skew from market lows (4/9, gray) vs last night (teal). As you can see, current put skew has since declined (left red arrow), suggesting traders sold puts into the tariff pause (this syncs with the 4,600-4,800 positive GEX chart, above).

Note the gold line is from 4/2, just before the aggressive tariff plan was announced.

To the upside, we see call IV’s are currently higher vs 4/9 (right red arrow), and at-the-money vols are nearly unchanged. We had/have been strongly pursuing the idea of call selling into sharp rallies last week, and this sticky upside vol has indeed been a headwind for those positions. However, because the SPX is off 3-4% from last weeks highs, short calls have been profitable (depending on strike/tenor/strategy). Ultimately, these current high upside IV’s may still offer opportunity for further short call strategies into equity rallies.

More critically, we wonder if the drop-off of some dealer short calls today may lead to a deflation of upside call IV into next week (i.e. the teal line goes down toward the gold line).

Focus is also likely to now shift to earnings, which pick up in earnest next week (the SG earnings calendar is below, with the implied earnings move). This may be one of the more important earnings seasons in some time as companies project tariff policy impacts, and we expect implied vols/options prices to reflect more uncertainty into these earnings vs prior earnings periods. For this reason we will be watching more closely for single stock options opportunities over the next few weeks.